Daily Key points: Attention turns towards US employment report for October

The USD continued to gain on the back of the Fed’s hawkish interest rate decision on Wednesday, yet today market attention is expected to shift towards the US employment report for October. The Non-Farm Payroll (NFP) figure is expected to drop to 200k if compared to September’s 263k, the unemployment rate to tick up to 3.6% and the average earnings growth rate to slow down to 4.7% yoy if compared to last month’s 5.0% yoy. Overall, should the actual rates and figures meet their respective forecasts, they may imply that the US employment market has started to feel the heat of the Fed’s monetary policy tightening and is slowly beginning to ease. Should that be the case we may see the USD relenting some ground on further expectations that the Fed may abandon its aggressive rate hiking path, US stockmarkets may regain some confidence and be on  the rise, while gold’s price could benefit from a possible weakening of the USD. On the flip side should the employment report show that the US labour market remains tight, and the data be better than expected, we may see the USD gaining asymmetrically, as such a scenario could allow the Fed to continue its monetary policy tightening focusing on its efforts to curb inflationary pressures and without the worries for the US employment market.

At the same time, we also note the release of Canada’s employment data for October and note that the Employment change figure is expected to drop to 5.0k compared to 21.1k in September, while the unemployment rate is expected to tick up to 5.3%. Should the forecasts be verified, we may see the Loonie losing some ground as the release may imply that the tightening of the Canadian employment market is losing some steam. Last but not least we cannot miss out on commenting on BoE’s interest rate decision yesterday, as the bank delivered a 75-basis points rate hike as was expected yet the pound tumbled as worries for the outlook of the UK economy intensified. In the accompanying statement the bank highlighted that inflationary pressures are too high and have to be curbed and foreshadowed more rate hikes to come, albeit BoE Governor Bailey stated that increases of 0.75% are not to be the new normal, while also stated that the shock to the UK economy is even greater than the 1970s and the bank’s forecasts how expectations for the recession to be deep and long lasting, which may continue to weigh on the pound. GBP/USD tumbled yesterday breaking below the 1.1275 (S1) support line, now turned to resistance.

We tend to maintain a bearish outlook for the pair, yet please note that that the RSI indicator is below the reading of 30 which on the one hand confirms the bearish outlook, yet on the other may imply that the pair has reached oversold levels and may be ripe for correction higher. Should the selling interest persist, we may see the pair breaking the 1.1100 (S1) support line on its journey southwards. If the pair corrects higher and find extensive buying orders along its path, we may see it breaking the 1.1275 (R1) line and aim for the 1.1460 (R2) level. 

USD/CAD dropped and during today’s Asian session broke the 1.3715 (R1) support line, now turned to resistance. We tend to maintain a bearish outlook for the pair, yet note that the RSI indicator is just above the reading of 50, which may imply that a bearish sentiment has still not fully settled in. Should the bears actually maintain control over the pair, we may see USD/CAD breaking the 1.3650 (S1) support line and aim for the 1.3560 (S2) level. Should the bulls take over, we may see USD/CAD reversing course, breaking the 1.3715 (R1) resistance line and aim for the 1.3810 (R2) level. 

Other highlights for the day:

Today we note in the European session the release of Germany’s industrial orders growth rate for September, while on the monetary front please note that ECB President Lagarde and BoE chief economist Pill are scheduled to speak. In the American session note that Boston Fed President Collins is scheduled to speak. During Monday’s Asian session we note the release of China’s trade data for October, with Aussie traders keeping an eye out especially for the import growth rate.   

GBP/USD H4 Chart

Support: 1.1110 (S1), 1.0920 (S2), 1.0760 (S3)

Resistance: 1.1275 (R1), 1.1460 (R2), 1.1640 (R3)

USD/CAD H4 Chart

Support: 1.3650 (S1), 1.3560 (S2), 1.3500 (S3)

Resistance: 1.3715 (R1), 1.3810 (R2), 1.3900 (R3)

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This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

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