US data and Powell to catch traders’ attention

There were some mixed signals in the FX market yesterday with the USD relatively remaining stable against it’s counterparts. On a monetary level, Fed policymakers tend to avoid giving a more specific forward guidance in an effort to keep their options open for the December meeting. Overall and according to Fed Fund Futures currently, the market seems to be pricing in a rate cut in the December meeting and the Fed to remain on hold in the one in January. Fed Chairman Powell in his speech today could provide more clues regarding the Fed’s intentions and move the markets. For the time being the doubts for a clear rate-cutting path for the Fed tend to maintain some support for the USD. Today attention is expected to be placed also on the macroeconomic US data. Starting with the November ADP national employment figure, a possible drop of the indicator’s reading, beyond market expectations, could weigh on the USD as it would imply a tighter employment market. As for growth we highlight the ISM non-manufacturing PMI figure also for November and should the figure drop beyond market expectations we may see it weighing on the USD as it would imply a slowdown in the expansion of economic activity in the US Services sector.

USD/JPY rose during today’s Asian session, bouncing on the 149.40 (S1) support line. In its upward movement the pair broke the downward trendline guiding it, indicating an interruption of the downward motion. Hence we switch our bearish outlook in favour of a sideways motion bias for the time being, with the boundaries possibly being set at the 151.35 (R1) resistance line to the upside and the 149.40 (S1) support level, to the downside. Yet we note that he RSI indicator remains below the reading of 50, implying possibly a bearish predisposition of market participants for the pair. For a bearish outlook we would require the pair to break the 149.40 (S1) line clearly and start aiming for the 146.95 (S2) level. Should the bulls take over, we may see USD/JPY, breaking the 151.35 (R1) resistance level, opening the gates for the 154.65 (R2) base.    

Across the Atlantic the pound seems to remain stable against the USD. Pound traders may turn their attention towards BoE Governor Andrew Bailey, who is scheduled to make statements later today. Should a more hawkish tone prevail in his speech, we may see the pound getting some support as it could solidify the markets’ expectations for the bank to remain on hold in its next meeting. Please note that the uncertainty about the US employment data tends to cloud BoE’s view on the UK employment market, a crucial element in forming monetary policy. Overall we see the case for the interest rate differential outlook to favour the pound if we compare the BoE with the Fed and the ECB, which are expected to cut rates. While on a political level, there seems to be a stability by the “no drama” Starmer government also providing an advantage to the pound, at least against the EUR, as political turmoil seems to be tormenting the Euro Zone at the moment.   

Cable remained in a sideways motion just above the 1.2620 (S1) support line. We currently maintain our bias for the pair’s sideways motion to continue. On the other hand the RSI indicator remains below the reading of 50, implying the residue of a bearish sentiment among market participants for the pair. Should the bears take over, we may see the pair breaking the 1.2620 (S1) support line and aiming for the 1.2470 (S2) support level. If the bulls take over, we may see GBP/USD aiming if not breaching the 1.2845 (R1) resistance level. 

Other highlights for the day:

In today’s European session, we get UK’s final Services PMI figure for November while ECB board member Cipollone and ECB President Christine Lagarde are scheduled to speak. In the American session, we get from the US October’s Factory orders and oil traders may be interested in the release of the weekly EIA crude oil inventories figure. On a monetary level, we note that St. Louis Fed President Musalem and Fed Chairman Jerome Powell speak. In tomorrow’s Asian session, we get Australia’s trade data for October.

USD/JPY Daily Chart

• Support: 149.40 (S1), 146.95 (S2), 143.45 (S3)
• Resistance: 151.35 (R1), 154.65 (R2), 158.45 (R3)

GBP/USD Daily Chart

• Support: 1.2620 (S1), 1.2470 (S2), 1.2300 (S3)
• Resistance: 1.2845 (R1), 1.3040 (R2), 1.3260 (R3)

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