All eyes fixed on the US employment report

Today at 12:30 (GMT), the US employment report for October with its Non-Farm Payrolls Figure is due out. The release tends to attract most of the market’s attention, especially after the Fed’s interest rate decision on Wednesday. The unemployment rate is expected to tick up and reach 3.6%, if compared to September’s record low 3.5%, which is considered quite low for US standards, the average earnings growth rate is forecasted to accelerate and reach +3.0% yoy, if compared to last month’s +2.9% yoy and the Non-Farm Payrolls figure to drop substantially reaching +89k, if compared to September’s reading of 136k. Should the actual rates and figures meet their respective forecasts, we could see the USD weakening as the usually tight US labour market seems to be showing some cracks. Especially the substantial drop of the NFP figure could create worries for the US employment market weakening the USD further after the Fed’s interest rate decision on Wednesday. We tend to resist arguments that the projected drop could have been caused by the strike at GM, albeit it may have caused some drag on the employment market. At the positive side, it should be mentioned that yesterday’s initial jobless claims figure, more or less confirmed the low levels of the indicator’s readings for the standards of the US economy, despite its slight rise. EUR/USD maintained a sideways motion yesterday and despite some bearish tendencies during the US opening, it managed to remain above the 1.1150 (S1) support line. We expect the pair to maintain a sideways motion albeit we also suspect that the bulls maybe hiding just around the corner should the US employment report disappoint the markets. Should the bulls actually take charge of the pair’s direction, we could see the pair breaking the 1.1200 (R1) resistance line and aim for the 1.1250 (R2) resistance level. Should on the other hand the bear dictates the price action of EUR/USD, we could see the pair breaking the 1.1150 (S1) support line, and aim for the 1.1105 (S2) support level.

…while trade uncertainty strengthens JPY…

The USD weakened yesterday against the JPY as the markets were quite nervous about the US-Sino trade relationships. A Bloomberg report stated that Chinese officials doubt if a long-term deal is possible with Trump, boosting worries about the possibility of a comprehensive long-term deal in the US-Sino relationships. The report also states that Chinese officials warned in private meetings that China will not bulge on the thorniest issues and remained concerned about the US president’s impulsive nature. Albeit the report as such does not seem to touch the possibility of a partial deal, it seems to down play the importance of such a deal and casts doubt about the possibility of trade peace between the two countries in the long term. Also, it should be noted that a summit in Chile next month at which the two leaders were to meet and possibly sign a partial deal, was cancelled, creating an additional problem, albeit of a more technical nature. Should market uncertainty about the US-Sino relationships rise even further, we could see JPY strengthening. USD/JPY tumbled yesterday breaking the 108.35 (R1) support line, now turned to resistance. Despite the pair stabilizing during today’s Asian session, we could see further bearish tendencies, should the US financial releases weaken the USD side of the pair, or market uncertainty rise further. On a more technical level though it should be noted that the RSI indicator in the 4-hour chart, remains steadily below the reading of 30 and could be implying a rather overcrowded short position. Should the pair come under the selling interest of the market we could see it breaking the 107.75 and aim for the 107.20, while if it finds fresh buying orders along its path, we could see the pair breaking the 108.35 (R1) and aim for the 109.00 (R2) resistance level which contained the pair’s price action a number of times in the past week.

Other economic highlights today and early tomorrow

Today during the European session, we get Switzerland’s CPI rate for October and UK’s manufacturing PMI also for October. In the American session, besides the US employment report for October, we also get from the US the ISM manufacturing PMI for October and the Baker Hughes oil rig count. In Monday’s Asian session, we get Australia’s Retail sales growth rate for September. As for speakers Dallas Fed President Kaplan, NY Fed President Williams, Fed’s Vice Chairman Clarida and Fed’s Vice Chairman Quarles speak.

USD/JPY 4 Hour