UK’s employment data in focus

Over in the UK, the nation’s employment data for September, which was released earlier on today, showcased a mixed employment report. In particular, the average hourly earnings rate came in higher than expected, in addition to the claimant count change figure for October coming in lower than expected, implying a resilient labour market. However, the unemployment rate ticked upwards from 4.0% to 4.3% and thus in our view, the increase in the unemployment rate may be more influential in the BoE’s interest rate decisions. Thus, in our view we would not be surprised to see increasing pressure on the BoE to continue on their monetary policy easing path, perhaps even more aggressively which in turn could weigh on the pound. Over in the US, the world is widely awaiting the composition of the second Trump administration, with numerous names being touted by the media as possible candidates for a variety of roles. The composition of the new administration could influence the markets. In our view, we would not be surprised to see positions that do not require Senate approval, to be staffed and filled by outspoken supporters of President-elect Trump, in addition to the cabinet positions that require Senate approval. Overall, the incoming Trump administration could heavily influence the markets depending on each official appointment. In Europe, Germany is gearing up for their early elections following the dissolution of the coalition government between the SPD, Grune and the FDP. In particular, the vote of no-confidence could occur this week and may increase EUR volatility.

EUR/USD appears to be moving in a downwards trajectory, with the pair currently taking aim for our 1.0615 (S1) support level. We opt for a bearish outlook for the pair and supporting our case is the death cross that has formed where the 50MA has crossed below the 100MA implying bearish market tendencies. Moreover, the RSI indicator below our chart currently registers a figure near 30, implying strong bearish market tendencies as well. For our bearish outlook to continue, we would require a break below the 1.0615 (S1) support level, with the next possible target for the bears being the 1.0500 (S2) support base. On the flip side for a sideways bias we would require the pair to remain confined between the 1.0615 (S1) support level and the 1.0805 (R1) resistance line. Lastly, for a bullish outlook, we would require a clear break above the 1.0805 (R1) resistance line, with the next possible target for the bulls being the 1.0930 (R2) resistance ceiling.

The S&P 500 is soaring to new all-time highs having broken above our resistance now turned to support at the 5885 (S1) level. We opt for a bullish outlook for the index and supporting our case is the RSI indicator below our chart which currently registers a figure near 70 implying a strong bullish market sentiment. For our bullish outlook to continue, we would require a break above the 6150 (R1) potential resistance level, with the next possible target for the bulls being the 6385 (R2) resistance line. On the flip side for a sideways bias, we would require the index to remain between the 5885 (S1) support level and the 6150 (R1) possible resistance level. Lastly, for a bearish outlook, we would require a clear break below the 5885 (S1) support level with the next possible target for the bears being the 5675 (S2) support line.

Other highlights for the day:

Today we get Germany’s final HICP rate for October, UK’s employment data, Germany’s ZEW indicators for November and Canada’s building permits for September. On the monetary front, we note that BoE Chief Economist Pill, ECB Board Member Cippolone, Fed Board Governor Waller, Richmond Fed President Barkin and Minneapolis Fed President Kashkari speak. In tomorrow’s Asian session, we get Australia’s consumer sentiment for November, Japan’s corporate goods prices for October and Australia’s wage price index for Q3. On the monetary front we note that Philadelphia Fed President Harker and Richmond Fed President Barkin are scheduled to speak.

EUR/USD Daily Chart

• Support:  1.0615 (S1), 1.0500 (S2), 1.0390 (S3)
• Resistance: 1.0805 (R1), 1.0930 (R2), 1.1045 (R3)

US500 Daily Chart

• Support: 5885 (S1), 5675 (S2), 5400 (S3)
• Resistance: 6150 (R1),  6385 (R2),  6620 (R3)

If you have any general queries or comments relating to this article please send an email directly to our Research team at research_team@ironfx.com

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