September’s US employment report in focus

The USD edged lower against its counterparts yesterday, ahead of the release of September’s US employment report. We note that the market’s expectations for a possible drop in the NFP figure may have been enhanced after the release of the ADP figure which dropped beyond market expectations. Currently, market expectations are for the NFP figure to drop to 170k, if compared to August’s 187k an element that may weaken the USD as it implies that the ability of the US employment market to create new jobs is fading, while the unemployment rate is expected to tick down to 3.7%, reminding us that the US employment market remains tight and thus supporting the USD. We tend to view risks related to the release as titled to the downside, and should the actual rates and figures imply a wider-than-expected crack in the US employment market’s tightness we may see the USD slipping as the data may also solidify the market’s expectations for the Fed to remain on hold in its coming meeting. Yet we also note that there is wide uncertainty for the actual rates and figures to be released and tend to advise caution. We highlight that the release may have wider ripple effects beyond the FX market and should data show an easing of the US employment market we may see support rising for US stock markets and gold’s price and vice versa. 

USD/JPY seems to have stabilised between the 150.10 (R1) resistance line and the 148.00 (S1) support line. We tend to maintain a bias for the sideways motion to continue, yet the release of the US employment report for September may alter that picture. Should the bulls take over, we may see USD/JPY breaking the 150.10 (R1) resistance line and aim for the 151.90 (R2) resistance nest. Should the bears take over, we may see the pair breaking the 148.00 (S1) support line and aim for the 146.10 (S2) support level.   

Canada’s September employment data also due out

North of the US border and at the same time of the release of the US employment data, we also get Canada’s employment data for September. The unemployment rate is expected to tick up and reach 5.6%, while the employment change figure is expected to drop more by almost half and reach 20.0k. Should the actual rates and figures meet their respective forecasts, we may see the CAD weakening as they would imply that the Canadian employment market’s tightness seems to crack. Such rates and figures may enhance any tendency of the Bank of Canada to remain on hold. Yet we note that the expected rates and figures tend to paint a not-so-gloomy picture for the Canadian employment market and thus may mute any bearish market reaction for the Loonie should they be realised. 

USD/CAD after failing to reach the 1.3800 (R1) resistance line, seems to have stabilised between the R1 and the 1.3660 (S1) support level. We tend to maintain a bias for the sideways motion to be maintained, given also that the RSI indicator remains just above the reading of 50, implying a rather indecisive market. Yet the simultaneous release of the US and the Canadian employment data for September later today may widen volatility for the pair and change USD/CAD’s direction. Should the pair find extensive buying orders along its path we may see USD/CAD finally breaking the 1.3800 (R1) resistance line and aim for the 1.3900 (R2) resistance level. Should a selling interest be expressed by the market, we may see USD/CAD breaking the 1.3660 (S1) support line and aim for the 1.3565 (S2) support hurdle.   

Other highlights for the day:

Today in the European session, we note the release of Germany’s industrial orders for August as well as UK’s September Halifax house prices growth rate. In the American session, we note that Federal Reserve Board Governor Waller speaks.

USD/JPY 4 Hour Chart

Support: 148.00 (S1), 146.10 (S2), 144.55 (S3)

Resistance: 150.10 (R1), 151.90 (R2), 153.50 (R3)

USD/CAD Chart

Support: 1.3660 (S1), 1.3565 (S2), 1.3450 (S3)

Resistance: 1.3800 (R1), 1.3900 (R2), 1.4045 (R3)

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