EUR/USD: Trading the US Nonfarm Employment Change

US Nonfarm Employment Change measures the change in the number of newly employed people in the US, excluding workers in the farming industry. A reading which is higher than the market forecast is bullish for the dollar. Here are the details and 5 possible outcomes for EUR/USD^[1].

Published on Friday at 12:30 GMT.

Indicator Background

Job creation is one of the most important leading indicators of overall economic activity. The release of US Non-Farm Employment Change is highly anticipated by the markets, and an unexpected reading can have a substantial impact on the direction of EUR/USD.

Nonfarm Employment Change dropped sharply in August report to 151 thousand, well short of the estimate 180 thousand. The indicator is expected to rebound in September, with an estimate of 171 thousand. Will the indicator climb higher as expected?

Sentiment and Levels

Despite a weak Eurozone economy and banking troubles, EUR/USD has shown extreme stability. Monetary divergence favors the US dollar, but the euro continues to hold its own. So, the overall sentiment is neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.1375, 1.1335, 1.1230, 1.1190, 1.1125 and 1.1070

5 Scenarios

1. Within expectations: 168K to 174K. In such a scenario, the EUR/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 175K to 179K: An unexpected higher reading could push the pair below one support line.
3. Well above expectations: Above 179K: Such an outcome could push the pair lower and two or more support lines could fall as a result.
4. Below expectations: 163K to 167K: A weak reading could result in EUR/USD breaking above one resistance line.
5. Well below expectations: Below 163K. A very soft reading could result in the pair breaking above two or more resistance lines.

For more about the euro, see the EUR/USD forecast^[2].

Get the 5 most predictable currency pairs^[3]

References

1. ^{^} EUR/USD (www.forexcrunch.com)
2. ^{^} EUR/USD forecast (www.forexcrunch.com)
3. ^{^} Get the 5 most predictable currency pairs (www.forexcrunch.com)

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Pound and yen have a bad start to October [Video]

A lot of news is pouring in and affecting the mood. The British pound suffers from a talk of a hard Brexit and ignores positive data. The yen slides on better market atmosphere, related to higher oil and more certainty related to the US elections. The dollar also gained against the euro until some “taper-talk” came into play. Tension is mounting towards the Non-Farm Payrolls report with a promising first sign.

Video of the full morning show for October 5th 2016:

Get the 5 most predictable currency pairs^[1]

References

1. ^{^} Get the 5 most predictable currency pairs (www.forexcrunch.com)

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Preview: US: ADP Employment, ISM Non-Manufacturing - BofA Merrill, SEB

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Preview: US: ADP Employment, ISM Non-Manufacturing - BofA Merrill, SEB

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EUR/USD: Trendline Resistance; GBP/USD: Symmetrical Triangle - Credit Suisse

While EURUSD eased back from last week’s high, the immediate focus remains still on resistance next at 1.1250, above which can aim at the falling trendline from May at 1.1276/84.

Strong selling is expected to emerge here again, but a direct topside break can see a move to the September 2016 peak and trendline resistance at 1.1327/28.

Support shows initially at 1.1203/00, with 1.1160/53 needing to hold to keep the trend still higher. Below 1.1153 can see a deeper fall to the 1.1123 price lows where fresh buying is expected to show.

CS runs a long EUR/USD from 1.1160 targeting 1.1280.

GBPUSD starts the week off in full retreat and has sold off to remove the low end of converging range/trendline support at 1.2914/30, and followed on to remove the mid-August low at 1.2866.

The breakdown begins to confirm a bearish “symmetrical triangle” continuation pattern. We would expect this to hold at first for a bounce. However, we expect an eventual break below here to then aim at 1.2535, with measured targets from the pattern lower at 1.2271/62.

Resistance moves to 1.2901/06, then 1.2914/30, with 1.2997/99 expected to cap to keep the trend directly lower.

CS took profit on its short GBPUSD runs a limit order to short again at 1.2914 targeting 1.2535.

*These trades are recorded and tracked in eFXplus Orders.

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USD: 'Steady As It Goes'; We Forecast A 200k Rise In Sep Payrolls - Barclays

The main economic release for the week will be the employment report for September on Friday. We forecast a 200k rise, which includes +185k from the private sector, in particular, service providing employers. This would be in line with the 12-month trailing average and above the 6-month trend, which, we think, is enough to keep the Fed on track to hike 25bp in its December meeting.

In this regard, we expect the USD to be supported as markets are only pricing a 50% probability of the Fed rising rates through year-end.

Elsewhere in the report, we expect the unemployment rate to decline to 4.8%, average hourly earnings to rise 0.2% m/m and 2.6% y/y, and the average workweek to tick up 0.1, to 34.4 hours.

In addition, the USD could be additionally supported by the fact that Mrs. Clinton has regained some momentum (Figure 5) after the presidential debate particularly vis-a-vis safe-haven currencies and commodities such as JPY and gold. Markets will continue following poll results closely to assess any potential shift from undecided voters to either of the candidates as the share of them compared with past elections remains relatively high

Copyright © 2016 Barclays Capital, eFXnews™

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Oil: Pennant Pattern & Seasonal Headwinds: Levels & Targets - BofA Merrill

An oil pennant pattern could lead to a large base

A rally to $57.00 would break the neckline at $52.00 of the still developing head and shoulders base. The base is forming the right shoulder and a broken neckline would project oil prices to the May 2015 highs of nearly $63.00/brl (a 61.8% target).

Oil seasonal headwinds - trend is choppy and weak in Q4

Chart 2 shows oil prices tend to decline on average in Q4 during the last 5, 10 and 30 years. In December they tend to find a bottom. This period takes into account the large decline in oil prices in 2008 and 2014. However further study of Chart 3 shows most Q4 periods are sideways to lower periods.

We see support levels at 44.50, 43.35 and resistance levels at $50.00 and 51.80.

Copyright © 2016 BofAML, eFXnews™

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AUD/CAD: Buying Dips Targeting Topside 1.0284 - TD

AUD/CAD: The RBA left rates unchanged as expected. Small tweaks to the statement saw AUD drift lower on the release but has clawed back ahead of the NA open. The RBA expects inflation to remain low for some time, giving it some wiggle room to cut rates if necessary. That said, the base case if for the RBA to stay on hold with some scope to tweak policy next year if inflation undershoots persist. This shifts the focus to the Q3 inflation report released later this month.

AUD still best-placed to outperform CAD and other majors.

Our high-frequency fair value model shows the cross is overvalued, but the gap is not wide enough to fade yet.

We like buying AUDCAD dips with our models flagging topside near 1.028.

Copyright © 2016 TD Securities, eFXnews™

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