Market focus on Friday’s August US employment report

The USD continued to rise on Friday despite the PCE rates for July, failing to accelerate both on a core and headline level. The rise of US Bond yields, especially for the ones with longer maturity, may have been a factor supporting the USD as the week came to a close. We expect the markets to focus on the release of the US employment report for August on Friday, as the next big test for the USD, given also the Fed’s dual mandate to keep inflation low and steady and at the same time promote maximum employment.

Across the Atlantic, in Germany the far-right party AfD seems to have scored a win at the state elections of Thuringia and at the same time came in marginally second in the state elections in Saxony. The rise of the far-right party tends to stoke worries for intensifying centrifuge forces within the EU, on a fundamental level for EUR traders.   

On a technical level, we note that EUR/USD continued falling on Friday aiming for the 1.1010 (S1) support line. Given the downward motion of the pair over the past three days we expect some bearish tendencies for the pair, yet a fragile stabilisation during today’s Asian session was achieved. For the bearish outlook to be maintained, we would require the pair to break clearly the 1.1010 (S1) support line and thus take aim of the 1.0890 (S2) support base. Should the bulls regain control over the pair’s direction, we may see the pair breaking the 1.1140 (R1) resistance line and thus open the gates for the 1.1275 (R2) resistance hurdle.                    

Other highlights for the day

Today we get UK’s nationwide house prices for August, Turkey’s GDP rate for Q2, Switzerland’s, the Czech Republic’s, Germany’s, Norway’s and the UK’s manufacturing PMI figure for August. During tomorrow’s Asian session, we get Australia’s current account balance for Q2 which could move the Aussie. Please note that on Saturday we got China’s NBS manufacturing PMI figure for August showing another slight contraction of economic activity for the Chinese manufacturing sector, yet the signal was contradicted by the Caixin Manufacturing PMI figure for the same month in today’s Asian session.

On a technical level, AUD weakened slightly against the USD on Friday. Also the pair’s price action has broken the upward trendline guiding it since the 5^th of August, signalling an interruption of the upward movement, hence we switch our bullish outlook in favour of a sideways motion bias initially. The RSI indicator remains between the readings of 50 and 70, implying a bullish predisposition of the market for the pair. Should the bulls regain control, we may see the pair breaking the 0.6870 (R1) resistance line and start aiming for the 0.7030 (R2) resistance level. Should the bears take over we may see AUD/USD breaking the 0.6715 (S1) support line and start aiming for the 0.6575 (S2) support barrier. 

As for the rest of the week

On Tuesday we get Switzerland’s and Turkey’s CPI rates, Canada’s manufacturing PMI and from the US the ISM manufacturing PMI figure, all being for August. On Wednesday, on the monetary front we note from Canada BoC’s interest rate decision and we also get Australia’s GDP rates for Q2, Euro Zone’s final Composite PMI and UK’s Services PMI figure both being for August, Canada’s trade data, the US Factory orders and the JOLTS job openings figure, all being for July. On Thursday we make a start with Australia’s trade data for July, Germany’s industrial orders for the same month, the US ADP national employment figure for August and the ISM non-manufacturing PMI figure also for August. On Friday, we get Japan’s All household spending for July, Germany’s industrial output also for July, UK’s Halifax House prices for August, Eurozone’s revised GDP rate for Q2 and we highlight the release of the US employment report for August and note Canada’s employment data for the same month. 

EUR/USD Daily Chart

• Support: 1.1010 (S1), 1.0890 (S2), 1.0780 (S3)
• Resistance: 1.1140 (R1), 1.1275 (R2), 1.1385 (R3)

AUD/USD Daily Chart

• Support: 0.6715 (S1), 0.6575 (S2), 0.6445 (S3)
• Resistance: 0.6870 (R1), 0.7030 (R2), 0.7155 (R3)

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