US employment report for March under the spotlight

The USD edged a bit higher yesterday against its counterparts, yet the overall movement tended to resemble a relative stabilization of the greenback, given also the low volatility characterizing the markets, probably also due to the Catholic Easter holidays that kept a number of traders at home. A substantial number of markets are to be closed today hence we may see thin trading conditions being present. The main release of the day is expected to be the US employment report for March and the relative inactivity of the market tends to resemble the calm before the storm. Currently, forecasts are for the Non-Farm Payrolls (NFP) figure to drop to 239k if compared to February’s 311k, the unemployment rate to remain unchanged at 3.6% and the average earnings growth rate to slow down to 4.3% yoy if compared to February’s 4.6% yoy. Should the actual rates and figures meet their respective forecasts, we may see the drop of the NFP figure disappointing traders and weakening the USD, especially after the adverse release of employment data during the week, namely the JOLTS Job openings for February which dropped below 10 million for the first time since May 2021 presenting a new post-pandemic low, the ADP National Employment figure for March, which dropped substantially more than expected, but also the weekly initial jobless claims figure which rose more than expected, all implying an easing of the US employment market’s tightness. On the flip side, should the unemployment rate remain unchanged at 3.6%, that could imply that the tightness of the US employment market is still strong and could contain market worries and the possible weakening of the USD, as it is one of the lowest levels for unemployment historically. Overall, though should the actual data meet their forecasts, we do not expect the Fed to be substantially influenced and that the release is to prevent the bank from proceeding with another rate hike if it wishes so. We may see increased volatility as there is still some degree of uncertainty, while at the same time the stakes are high.

EUR/USD remained relatively stable yesterday staying comfortably in the range set by the 1.1000 (R1) resistance line and the 1.0855 (S1) support level. We tend to maintain our bias for the sideways motion to continue and note that the Bollinger bands have narrowed reflecting the lower volatility present in the pair’s price action. Also, we note that the RSI indicator is running just above the reading of 50, which may also imply a relative indecisiveness on behalf of the market, which may allow the sideways motion to be maintained. On the other hand though, we note that the release of the US employment report depending on the actual rates and figures may alter decisively the pair’s direction. Should the bears take over, we may see EUR/USD breaking the 1.0855 (S1) support line and aim for the 1.0695 (S2) support level. Should the bulls take over, we may see the pair breaking the 1.1000 (R1) resistance line and aim for the 1.1140 (R2) resistance level.

USD/JPY edged higher yesterday, yet presented an easygoing mood as it remained well in the zone set by the 129.75 (S1) support line and the 132.85 (R1) resistance line, maintaining a relatively tight rangebound movement. We tend to maintain our bias for the sideways motion given also that the RSI indicator continues to run along the reading of 50 implying a rather well-balanced market sentiment, possibly in search of the direction of the pair’s next leg. Also, we note the narrowing of the Bollinger bands which tends to reflect the low volatility in the pair’s price action. Once again we would like to highlight though that the release of the US employment report for March may alter the pair’s direction, depending on the actual rates and figures due out. Should the pair find fresh buying orders along its path, we may see USD/JPY breaking the 132.85 (R1) resistance line and taking aim of the 135.15 (R2) resistance level. Should on the other hand a selling interest be expressed by the market, we may see the pair breaking the 129.75 (S1) support line and aim for the 127.55 (S2) support level.

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With exception of the release of the US employment report for March it’s expected to be a rather quiet Friday today, given also the Catholic Easter. During Monday’s Asian session, we note the release of Japan’s current account balance for February.