Focus on the US employment report for September

With the Fed’s decision to remain on hold, out on Wednesday, the USD seems to have continued losing ground against its counterparts yesterday. We expect market attention today to turn toward the release of the US employment report for October. We note that the non-farm payroll (NFP) figure is expected to drop to 180k from September’s astounding 336k, the unemployment rate to remain unchanged at 3.8% and the average earnings growth rate to slow down to 4.2% yoy from September’s 4.0% yoy. Should the actual rates and figures meet their respective forecasts, we may see the USD weakening, especially as traders may be disappointed by the drop of the NFP figure. Yet we note that the US employment market seems to remain rather tight, given that the unemployment rate remains unchanged at rather low levels and a correction lower in the NFP figure would be expected and thus may moderate any bearish market reactions. Also, given the release of the Fed’s interest rate decision, should the US employment market remain rather tight, that may allow the Fed to maintain its hawkish stance, yet no hike seems to be expected by the market.

On a technical level, we note that the USD against the JPY, tended to remain relatively unchanged just above the 151.10 (S1) support line. Given the relative stabilisation of the pair and the interruption of the downward motion, we tend to maintain a bias for the sideways movement to continue. Our view is also reinforced by the RSI indicator which currently runs along the reading of 50 implying a rather indecisive market. Should the bulls take over, we may see the pair aiming for the 151.70 (R1) line while in case the bears are in charge of the pair’s direction, we may see USD/JPY breaking the 150.10 (S1) line and aim for the 148.00 (S2) base. 

North of the US border and at the same time of the release of the US employment data, we note the support CAD has been enjoying given the improvement of the market sentiment and edging up of WTI prices in the past 24 hours. Today, we also get Canada’s employment data for September and CAD traders are expected to keep a close eye on the release. The unemployment rate is expected to tick up and reach 5.6%, while the employment change figure is expected to drop more to almost a third and reach 22.5k. 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 the Bank of Canada’s predisposition 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 if realised.

USD/CAD dropped breaking the 1.3800 (R1) support line, now turned to resistance. We tend to maintain a bearish outlook for the pair as long as the price action remains under the downward trendline guiding it and given that the RSI indicator is near the reading of 30, implying a strong bearish sentiment for the pair. Nevertheless we note some early signs of stabilisation. Should sellers maintain control over the pair, we may see it breaking the 1.3690 (S1) support line and aim for the 1.3565 (S2) support level. Should buyers be in charge, USD/CAD may reverse direction, break the prementioned downward trendline in a signal that the downward motion has been interrupted, break the 1.3800 (R1) level and aim for the 1.3900 (R2) line.

Other highlights for the day:

Today in the European session, we note the release of Turkey’s CPI rate for October and in the American session, we note the release of the US ISM non-manufacturing PMI figure for October. On the monetary front we note that Fed Vice Chair Barr, BoE Chief Economist Pill, BoE rate setter Haskel, Minneapolis Fed President Kashkari and Fed Vice Chair Barr are scheduled to speak, while on Monday’s Asian session, we note the release of BoJ’s minutes for the September meeting.  

USD/JPY 4 Hour Chart

Support: 150.10 (S1), 148.00 (S2), 146.10 (S3)

Resistance: 151.70 (R1), 153.35 (R2), 154.70 (R3)

USD/CAD 4 Hour Chart

Support: 1.3690 (S1), 1.3565 (S2), 1.3485 (S3)

Resistance: 1.3800 (R1), 1.3900 (R2), 1.3975 (R3)

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