Daily Key points: US employment report for September in the spotlight

The USD gained across the board yesterday as the markets repositioned themselves ahead of the release of the US employment report for September, while also a number of hawkish comments made by Fed policymakers also tended to provide a boost to the greenback. It was characteristic that Minneapolis Fed President Neel Kashkari stated that the bank is still “quite a ways away” from stopping rate hikes while Cleveland Fed President Mester stated that the Fed must be singularly focused on inflation and Fed Board Governor Cook floated the idea of “preemptive” rate hikes against a “stubbornly” high inflation. We expect that comments which are to be made today by Fed officials are to maintain the same hawkishness and could provide some support for the USD, albeit we must note that the market may have allready digested the Fed’s intentions and attention is to be placed on the US employment report for September as the Fed has a dual mandate to watch over inflation and the employment market. In the US employment report the NFP figure is expected to drop to 250k, if compared to 315k in August, the unemployment rate to remain unchanged at 3.7% and the average earnings to slow down to 5.1% yoy.

Should the actual rates and figures meet their respective forecasts, the release could imply that the US employment market has retreated on its ability to create new jobs as the NFP figure dropped yet remains tight as the unemployment rate remains unchanged at rather low levels. Overall such readings may allow the Fed to continue on its aggressive rate hiking path and despite some disappointment being present among traders for the forecasted drop of the NFP figure, any losses for the USD may be contained or not be that extensive. At the same time, we get Canada’s employment data for September and Loonie traders are to be watching closely as the employment change figure is expected to rise into the positives reaching 20.0k if compared to August’s -39.7k, while the unemployment rate is to remain unchanged at 5.4%. Overall such readings could provide some support for the CAD as they would be providing cover for Bank of Canada to continue on its rate hiking path and provide a boost to its confidence. It should be noted that BoC Governor Macklem in a speech he made yesterday stated that more rate hikes are needed as “We have yet to see clear evidence that underlying inflation in Canada has come down; domestic inflationary pressures have yet to ease”.

EUR/USD dropped breaking below the 0.9810 (R1) support line, now turned to resistance. We tend to maintain a bearish sentiment for the pair, yet the release of the US employment report for September may alter the pair’s direction. Should the selling interest be maintained as expected we may see the pair aiming if not breaking the 0.9700 (S1) support line on its journey southwards. Should the pair find fresh buying orders along its path, we may see it breaking the 0.9810 (R1) line and aim if not breach the 0.9900 (R2) level. USD/CAD was on the rise yesterday breaking the 1.3660 (S1) resistance line, now turned to support and continued higher, yet hit a ceiling at the 1.3750 (R1) resistance line currently.

We expect that the bullish tendencies could continue to be present for the pair, yet we would expect the simultaneous release of the employment data from the US and Canada for September to affect the pair’s direction. Should the bulls maintain control over the pair we may see it breaking the 1.3750 (R1) resistance line and continue higher testing if not breaking the 1.3835 (R2) resistance level. Should the bears take over, we may see the pair reversing course breaking the 1.3660 (S1) support line aiming lower.

Other highlights for the day

Today in the European session, we note the release of Germany’s industrial output growth rate for August, UK’s Halifax House Prices for September and Norway’s GDP rate for August. On the monetary front we note the planned speeches of BoE’s Deputy Governor Ramsden in the late European session and NY Fed President Williams, Minneapolis Fed President Kashkari and Atlanta Fed President Bostic.

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