• The AUDJPY is set to finish the week with gains of 0.40%.
• AUDJPY Price Analysis: Once it cleared 95.56, it could re-test the YTD highs at around 98.50.

The AUDJPY edges higher, snapping three days of consecutive losses amidst an upbeat market sentiment, as Wall Street pared its losses, while the US Dollar dropped almost 2%. At the time of writing, the AUDJPY is trading at 94.96, above its opening price by 1.89%.

AUDJPY Price Analysis: Technical outlook

The AUDJPY is neutral-to-upward biased and, on its recovery from weekly lows around 92.96, cleared the 50 and 100-day Exponential Moving Averages (EMAs), at 94.59 and 94.21, respectively. Of note, the AUDJPY needs to clear the weekly high at around  95.56, to pose a threat to the year-to-date highs at around 98.50.

On the flip side, the AUDJPY would remain range-bound, trapped in the 94.21-95.56 range.

Short term, the AUDJPY  is neutral-to-upward biased, hoovering around the R3 daily pivot level, which, once cleared, could send the cross towards the R4 pivot point at 95.42. However, the RSI at overbought territory could open the door for a pullback before resuming the uptrend.

Otherwise, if the AUDJPY struggles at around 94.96, the first support would be the R2 pivot point at 94.52. Break below will expose crucial demand zones like the 100-EMA at 94.28, followed by the psychological 94.00 figure.

AUDJPY Key Technical Levels

• The pound rallies 1.9% on the day to close the week near 1.1400.
• US unemployment and wage inflation data hit the dollar.
• The pound has shrugged off post-BoE's bearish pressure.

The pound has continued appreciating during Friday’s US afternoon trading, buoyed by the broad-based USD weakness, to reach session highs at 1.1380.

The pair has shrugged off the previous day’s negative pressure on Friday, to perform a shocking 1.9% daily rally after bouncing from the lower range of the 1.1100s to close the week a few pips shy of 1.1400.

US unemployment grows with salaries slow down

Despite a brilliant Non-Farm Payrolls reading, the US unemployment rate and wage inflation data have shown the first signs of easing in the US labor market, which has tamed expectations of further aggressive tightening by the Federal Reserve and punished the US dollar.

Non-Farm employment has increased above expectations in October, showing a 261K reading, beating the 200K consensus, while September’s reading has been revised to a 315K increment from the 264K previously estimated. The unemployment rate, however, has increased to 3.7% from 3.5% in September, and the hourly wages have slowed down to 4.7% from 5%.

The pound has pared previous losses after having gone through one of its worst weekly performances in the last months. The dovish hike by the Bank of England on Thursday when BoE President Bailey signaled a softer tightening pace over the next months after delivering a 0.75% hike, triggered a broad-based pound sell-off.

Technical levels to watch

• Euro recovery extends to 0.9960 and erases losses from the previous four days.
• US unemployment and wage growth data send the US dollar tumbling.
• EURUSD: Further decline to 0.9500 is still likely – Rabobank.

The euro has squeezed higher during Friday’s US afternoon trading, with the pair reaching session highs at 0.9960 so far. The common currency has erased the previous four days’ losses with a shocking 2.2% daily rally, turning positive on the weekly chart.

US unemployment and wage growth data have crushed the dollar

The greenback accelerated its downtrend earlier today, following the release of October’s employment report. Non-Farm Payrolls data have beaten expectations with a 261K reading, beyond the 200K consensus, and with September's record revised up to 315K from 264K.

On the other hand, the unemployment rate increased to 3.7%, from 3.5% in September, and wage inflation slowed down to 4.7% from 5%. These embryonic signs of a potential easing in the labor market conditions have brought back the theory of slower rate hikes in December, sending the US dollar tumbling across the board.

EUR/USD: A decline to 0.95 is still likely– Rabobank

Currency analysts at Rabobank remain bearish on the pair and maintain their view of further decline towards 0.9500: “It is our view that the EUR is not fully priced for the headwinds facing the Eurozone economy (…) We continue to see risk of a fall in EURUSD to 0.95 in the weeks ahead and see the potential for the EUR to stay weaker for longer vs. the USD.”

Technical levels to watch

• Silver prices surge 7% to hit three-week highs near $21.00.
• The US dollar falls as US labor markets show signs of easing.
• XAGUSD has reached an important resistance level at $20.90.

Silver prices skyrocketed on Friday, propelled by a weak US dollar, following a mixed US Non-Farm Payrolls report. The precious metal appreciated about 7% on the day, breaking beyond the top of the last two weeks' trading range, around $20, to hit three-week highs at $20.80 so far.

The US dollar dives as the labor market show signs of easing

The release of the US Non-Farm Payrolls report sent the US dollar tumbling earlier today. Non-Private payrolls increased to 261K in October, beating expectations of a 200K rise, and September’s figures have been revised up to 315K from the 264K initially estimated.

On the other hand, the unemployment rate has increased to 3.7% from 3.5% in September and wage inflation slowed down to 4.7% from 5% over the previous month. These figures suggest that labor market conditions might be easing, which brings the possibility of a dovish pivot in December back to the table.

XAGUSD approaching resistance at $20.95

From a technical point of view, silver is now right below an important resistance area at $20.90, where October 6 and 7 highs meet the 38,2% Fibonacci Retracement of the April – September decline.

With the pair now reaching overbought levels in hourly and daily charts, the possibility of a moderate pullback before further rally should be contemplated.

On the Upside, above $20.90, the next potential targets are October 4 high at $21.25 and. The 200-day SMA at 21.55.

On the downside, the intra-day level at $20.55 is holding bears for the time being, with the next potential targets at $20.00 previous resistance, and the 50-day SMA at $19.20.

XAGUSD daily chart

Technical levels to watch

• The dollar dives 0.9% on the day and hits one-month lows at 146.55.
• US payrolls increase, but unemployment rises, and salaries slow down.
• USDJPY: More likely to peak at 155 than at 160 – MUFG.

The US dollar is trying to return above 147.00 in the US afternoon trading session, to trim losses after having lost nearly 0.9% on the day, reaching one-month lows at 146.55.

The US dollar dives on the back of the US Non-Farm Payrolls report

The greenback accelerated its downtrend on Friday, after the release of a mixed US NFP report. Employment creation remains robust, with non-farm private payrolls increasing by 261K in October, beating expectations of 200K and September’s figures revised up to 315K, from the previously estimated 4 K.

On the other hand, the unemployment rate has risen to 3.7% from 3.5% in September, above the consensus of 3.6%, while hourly earnings increased by 4,7% in October from 5% in September. These figures suggest that labor market conditions might be starting to ease and have revived the possibility of a shorter rate hike in December.

USDJPY: Ceiling at 155, with 160 a long way off – MUFG

From a wider perspective, Analysts at MUFG anticipate that the USDJPY peak might not be far off: “We forecast a near-term USDJPY ceiling of 155 given that it has already passed 150 once, is still hovering around 148, and considering the speed of its ascent over the last six-plus months (…) The 2 April 1990 high of 160.35 could come into view if the Fed steps up its communication with the market and a terminal rate of 5.5% to 6% comes into view, but we do not expect this at present.”

Technical levels to watch

• The US dollar plunges 2.5% on Friday to hit six-week lows at 1.3470.
• A mixed NFP report sends the greenback tumbling.
• USDCAD is testing the neckline of a potential H&S formation.

The US dollar is about to close its worst daily performance in some months with a nearly 1.8% sell-off. The pair has extended its reversal from Thursday’s high at 1.3800 to levels below 1.3500 for the first time since late September.

A mixed employment report has hammered the US dollar

 The US Non-Farm Payrolls report has shown a 261K increase in October, beating expectations of 200K, and September’s figures have been revised up to 315K, from the previously estimated 4 K.

The unemployment rate, however, has risen to 3.7% from 3.5% in September, above the consensus 3.6%, while hourly earnings increased 4,7% in October from 5% in September. These figures suggest that labor market conditions might be easing, which has tamed expectations of further aggressive rate hikes by the Fed.

The US dollar, which had been surging since Wednesday, after US Fed President, Jeremy Powell, reiterated the need for further monetary tightening, dropped like a stone on Friday on the first signs that the bank’s monetary policy could be starting to take effect.

USDCAD is testing support at 1.3500

The daily chart shows the pair reaching the area where the neckline of a Head And Shoulders formation meets the 50-day SMA, at 1.3500.

A clear breach of that area would activate the H&S pattern, and could push the pair towards 1.3200 (September 1 and 7 highs and the100-day SMA) and then probably the 1.3000 psychological level.

USDCAD daily chart

Technical levels to watch

• The aussie rallies 2.5% on the day to hit session highs at 0.6470.
• Risk appetite and a mixed US employment report have boosted the AUD.
• AUD/USD capped below an important resistance area at 0.6470/0.6525.

The aussie is going through an extraordinary recovery on Friday, rallying about 2.5% on the day amid a favorable market sentiment, to regain most of the previous six days’ losses. The pair bounced up at 0.6280 area earlier on Friday to reach highs at 0.6475 during the midday US trading session, before consolidating above 0.6425.

US dollar dives after a mixed Non-Farm Payrolls report

US employment figures have shown mixed readings in October, which has increased the weakness of an already vulnerable US dollar as risk appetite returned to the markets. European equity markets have closed with gains beyond 2%while the main US stock indexes are mixed in the afternoon trading after a strongly positive opening.

Non-Far private employment increased by 261K in October, beating expectations of 200K, while September’s figures were revised to 315K, up from the previously estimated 264K.

Investors’ enthusiasm about the strong employment data has been offset by the higher-than-expected unemployment rate, which rose to 3.7% from 3.5% in September, beating the consensus of a 3,6% reading, and the slowdown on hourly wages, 4,7% in October from 5% in September.

These latter figures suggest that labor market conditions might be finally easing, which has tamed expectations of more aggressive tightening by the Feral Reserve and increased bearish pressure on the USD.

AUDUSD has reached an important resistance hurdle at 0.6470

A look at the four-hour chart shows that Friday’s sharp rally has pushed the pair to an important resistance area between 0.6470 and 0.6520.

The bullish cross seen between the 50 and the 200-period SMA anticipates the possibility of further appreciation, although, with the pair reaching overbought levels in hourly charts, some hesitation seems likely before the pair resumes the upside path.

AUDUSD 4-hour chart

Technical levels to watch

• A bullish-engulfing candle pattern in the EURJPY daily chart could open the door for further gains.
• If the EURJPY struggles at 146.00, a fall towards 144.00 is on the cards, ahead of the 50-day EMA at 143.15.

The EURJPY rises during the North American session, forming a bullish-engulfing pattern in the daily chart, nearby the weekly lows at around 144.00, and set to finish the week with losses of 0.66%. At the time of writing, the EURJPY is trading at 145.89, above its opening price by almost 1%.

EURJPY Price Analysis: Technical outlook

As abovementioned, the EURJPY daily chart depicts a two-candle bullish formation that suggests upward pressure is mounting on the pair. The Relative Strength Index (RSI) offers further confirmation, as the oscillator dived towards the 50-midline, but as price action spiked towards the fresh two-day high shy of 146.00, the RSI slope turned bullish, in sync with the EURJPY price action.

If the EURJPY clears the 146.00 figure, it will pave the way for further gains. Firstly, the November 2 daily high at 146.48, followed by the 147.00 figure, ahead of the October 31 swing high at around 147.74.

On the other hand, failure to crack 146.00, the EURJPY could tumble towards the November 3 swing low at 144.03. A breach of the latter will expose crucial demand zones like the 50-day Exponential Moving Average (EMA) at 143.15, ahead of the psychological 143.00 figure and the 142.00 mark.

EURJPY Key Technical Levels

Next week the Bank of Mexico will have its monetary policy meeting. According to analysts at Wells Fargo, Banxico will follow the Federal Reserve with another 75 basis points rate hike,  brining the key rate to 10%.     

Key Quotes: 

“With the Federal Reserve maintaining its hawkish stance on monetary policy and lifting interest rates 75 bps, we believe the Central Bank of Mexico will match that pace of tightening next week. Historically, Banxico has followed Fed interest rate decisions, and we do not think a decoupling will materialize next week. For what it's worth, Mexican policymakers have commented that a decoupling could be warranted if conditions change. However, with Mexico inflation still running above target and the economy relatively resilient, conditions have yet to change, and a 75 bps hike is likely to be delivered by Banxico members next week.”

“A 75 bps rate hike would leave Banxico as one of the last Latin American central banks that have not pivoted to a less aggressive stance on monetary policy. Peer central banks have started communicating a slowdown in their respective tightening cycles, although Mexico policymakers have yet to take their feet off the brakes. This hawkish posture has supported the Mexican peso over the course of this year and has resulted in the peso being one of the few currencies to strengthen against the dollar in 2022.”
 

The Canadian employment report surpassed expectations with a positive change in emlyment of 108K above the 10K of market consensus. Analysts at CIBC point out the surge could simply be a sign that some of the declines seen over the summer were simply statistical noise. According to them, the data support their call for a further 50bp interest rate hike at that time, but they warn there is still one more employment report to come before the next Bank of Canada (BoC) meeting. 

Key Quotes: 

“The big rebound in employment during October, accompanied by a rebound in the size of the labour force, is likely a sign that the declines seen over the summer were largely statistical noise, rather than a sign that the labour market truly surged ahead this month.”

“The breakdown of employment showed that all of the jobs created were full time positions, with part time actually down slightly relative to the prior month. Most of the jobs created were among private sector employees, although public sector employment and self-employment also rose.”

“Today's data support our call for a 50bp hike at the December meeting, rather than a more standard 25bp move, although there are plenty of economic data releases still between now and then, including one more labour force survey.”

The US official employment report showed payrolls increased by 261K in October, above the market consensus of 200K. According to analysts at Wells Fargo job numbers won’t move the needle much toward a 75 basis points rate hike at the next FOMC meeting. They see job growth moderating further over the coming months. 

Key Quotes: 

“The somewhat perplexing resilience in sectors such as manufacturing and construction could be in part explained by technical factors. We noted in a recent report that the birth-death factors to the payroll survey have been unusually large over the past year, reflecting the extraordinary rate of new business creation since the pandemic. October's beat looks to be at least in part due a record boost for this time of year.”

“We look for job growth to moderate further over the coming months. Layoffs according to initial jobless claims and the JOLTS report remain low, but discharges are only half the net hiring equation. Demand for additional workers appears to be slipping.”

“Our sense is that the FOMC would prefer to hike by "only" 50 bps in December, but hot economic data could force the Committee's hand to once again go 75 bps. On net, we doubt today's data move the needle much toward a 75 bps hike. A 50 bps rate hike remains our base case, with next Thursday's CPI print the next pivotal piece of data.”
 

• The euro appreciates for the third day in a row to test three-week highs at 0.8780.
• BoE's dovish rhetoric has increased downward pressure on the pound.
• EURGBP: Breach of 0.8780 resistance would cancel the downward trend from late-September highs.

The euro appreciated against the pound for the third consecutive day, extending its rebound from week lows at 0.8590 to test October 21 high at 0.8780 which, so far, remains firm.

A dovish BoE and grim economic prospects are hurting the GBP

The pound has been trading under strong bearish pressure this week, which has helped the EURGBP to rally nearly 2.4%, on the back of the dovish message by the Bank of England and the bleak economic perspectives ahead for the UK.

On Thursday, BoE President Andrew Bailey sent the pound tumbling at the press release held following the monetary policy decision, in spite of the 0.75% hike previously delivered by the bank. Bailey signaled to softer rates over the next months and warned that the country might have already entered a recession that could last two years and cause a 2.9% economic contraction.

EURGBP pushing against the 0.8780 resistance area

From a technical perspective, EURGBP bulls gained traction on Friday after confirmation above the 50-day SMA, at 0.8700, now acting as support to attempt an assault to the October 21 high at 0.8780.

Above here, the pair would have canceled the downward trend from late September highs, opening the path towards 0.8965 (Oct. 12 high) and 0.9000 psychological level.

On the downside, immediate support lies at the mentioned 50-day SMA, at 0.8700 with the next targets below there at 0.8650 (Oct 27 high) and 0.8570 (October 28 and 31 lows).

Technical levels to watch

• The American Dollar has difficulty finding its feet, down 1.39%, as shown by the US Dollar Index.
• Speculations that the Fed would tighten in smaller increases mounted as the labor market gave signs of easing.
• The US 2s-10s yield curve inversion, the deepest since the 1980s, and US recession fear increased.

Gold price continues to extend its rally in the October US Nonfarm Payrolls report aftermath, up by more than 2.50%,  in growing speculations that an uptick in the rate of unemployment might deter the Federal Reserve from aggressive tightening. However, Federal Reserve Chairman Jerome Powell said the Federal Funds rate (FFR) peak would be higher than September’s projections. Therefore, the XAUUSD is trading at around $1672 amidst a volatile trading session.

The US Unemployment Rate is approaching to 4%, a headwind for the US Dollar

Following the release of the Nonfarm Payrolls, the US Dollar falls further. The US economy added 261K jobs, above estimates of 200K, but what probably rocked the boat was that the Unemployment Rate increased by 3.7% from 3.5% in the previous month, signaling that the labor market is easing amid the most aggressive Federal Reserve tightening cycle. Also, Jerome Powell’s words that the Fed might begin to slow its pace of increases “as soon as the next meeting” is a headwind for the greenback.

The US 2s-10s yield curve inverted the most in 40 years as recession drums got louder

In the meantime, US Treasury bond yields, particularly the 10-year benchmark note rate, almost parked at 4.156%, unchanged. However, what’s grabbing the attention is the inversion of the 2s-10s yield curve, which is used as a leading indicator of upcoming recessions. At the time of typing, the spread between the US 2s and 10s is -0.534%, and it’s the highest inversion of the curve since the 1980s, as the US 2-year bond yield sits at 4.694%.

Of late, some Fed speakers are crossing newswires, led by the Boston Fed President Susan Collins. She said that she supports 75 bps increases if needed, added that inflation is too high and that the Fed “must restore price stability. According to Collins, the Fed’s monetary policy “is now in restrictive territory.” Later, Richmond’s Fed President Thomas Barkin said that the jobs report was about as he expected, though he added that the labor market remains tight and that there’s some work left to do.

Gold Key Technical Levels

GBPUSD fell after the BoE’s ‘dovish hike’. Nonetheless, economists at the Bank of Montreal expect the pair to hold above the 1.10 level.

Bank of England gave a divided policy decision

“The BoE actually moved boldly, raising its Bank rate 75 bps to 3.00%. Yes, the hawks are finally in the majority with seven (7) opting for 75 bps. The breakdown of the vote was surprising on two fronts: 1) We didn't expect four policymakers to join the three hawks, and 2) We didn't expect the dovish Silvana Tenreyo to shift from 50 bps to 25 (she felt that the economy was already in recession). Given this dissent, this is not a truly hawkish hike.”

“This is not the last we've seen from the BoE. We look for another 50 bps in December, then 25 bps in February, to 3.75%, with all moves being dependent on the data, and the fiscal update. Obviously.”

“We are cautiously optimistic that the 1.10 level in GBPUSD will hold, but a more aggressive-than-expected Fed is a downside risk to that call.”

• Dollar drops further on Friday despite NFP.
• After a busy week, now attention turns to US elections and CPI.
• EURUSD still down for the week, but reversal is euro positive.

The EURUSD rose further on Friday and hit a fresh two-day high at 0.9940, before pulling back to the 0.9900 area. The greenback is sharply lower across the board despite a better-than-expected NFP.

The employment numbers showed the US added 261K new jobs in October, above the 200K of market consensus. After an initial positive reaction, the Dollar then tumbled, and so far, it is having the worst day in weeks. An improvement in market sentiment contributes to weakening the Dollar amid job numbers and expectations that China will ease some of its Zero-Covid policies.

Next week, attention would be on US CPI numbers due on Thursday that should have a large impact on Fed policy expectations. The mid-term election will be on Tuesday.

Can the rebound continue?

“The EURUSD pair has spent the week below parity and posted a lower low and a lower high, a sign that bears are back. Profit-taking ahead of the weekend helped the pair to bounce on Friday, but the dominant bearish trend remains firmly in place”, explained Valeria Bednarik, Chief Analyst at FXStreet.

Bednarik warns the daily chart shows the bearish continuation is in doubt. “The EURUSD pair recovered above a directionless 20 SMA, which provides immediate support at around 0.9830, and seems poised to extend its recovery towards the next relevant dynamic resistance level, a bearish 100 SMA currently at around 1.0050.”

The pair is about to end the week with marginal losses and far from the weekly low, a positive sign for euro bulls. Still, it remains far from obtaining a weekly close the 20-week SMA at 1.0040.

Technical levels

• The pound trims losses after a four-day sell-off; tests levels past 1.1300.
• A mixed US NFP report send the dollar tumbling.
• GBPUSD is expected to depreciate further in the near-term  – UOB.

The pound is closing the week on a strong note, appreciating beyond 1% on the day, favored by a broad based US dollar weakness amid a positive market mood. The pair has extended its rebound from 1.1150 lows on Thursday, to hit session highs past 1.1300, trimming losses following a sharp sell-off over the previous four days.

US Non-Farm Payrolls paint a mixed picture

Non-Farm employment has increased above expectations in October with a 261K reading, beating the 200K consensus and showing that the US labor market remains in good health. Furthermore, September’s data have been revised to a 315K increment from the 264K previously estimated.

The unemployment rate, however, has increased to 3.7% from 3.5% in September, and the hourly wages have slowed down to 4.7% from 5%. These figures suggest that the tightness of the labor market might be starting to moderate, which has eased expectations of more aggressive tightening by the Federal Reserve, thus increasing downward pressure on the USD.

The greenback had rallied over the previous sessions following the hawkish comments by Fed President Powell, who reiterated the need for further monetary tightening after the bank’s monetary policy decision.

On the other end, the pound has been on the defensive over the previous days and particularly weak following the dovish hike by the Bank of England on Thursday. The bank hiked rates by 0.75% as expected, but BoE President Bailey signaled to a softer tightening pace over the next months, which accelerated the pound’s sell-off.

GBP/USD to face downward pressure over the near term – HSBC

FX analysts at HSBC are skeptical about the sustainability of the current pound rally and see the pair resuming the downtrend soon: “The BoE noted that, although further rate hikes would be required, this would ultimately mean going ‘to a peak lower than priced into financial market’. This is in direct contrast to the Fed which made the observation that guidance around the terminal rate would likely need to move higher (…) We see GBPUSD moving lower into year-end 2022, given this ongoing cyclical divergence between the US and UK economies and rate profiles.”

Technical levels to watch

USDCAD is snapping six-day uptrend. Economists at Westpac expect the pair to trend lower over the course of the next year and forecast USDCAD at 1.28 by end-2023.

CAD looks set for a run

“The Canadian Dollar has recently found itself in an interesting position, USDCAD remaining near its cycle highs despite the Bank of Canada delivering outsized rate hikes and signalling there is more to come; meanwhile, in our view, their economy has shown greater resilience than the US, Europe or the UK.”

“This status quo is unsustainable, so we continue to project USDCAD to lose altitude, targeting 1.28 and 1.26 as end-of-year levels for 2023 and 2024.”

Economists at Rabobank have have revised down tehir EURUSD forecast. The pair is expected to slump towards the 0.95 mark.

It is not clear if the ECB can support the EUR with rates hikes

“It is our view that the EUR is not fully priced for the headwinds facing the Eurozone economy.”

“There are no guarantees that the ECB will be able to support the EUR vs. the USD with rate hikes if its guidance on the economic outlook is sour.”

“We continue to see risk of a fall in EURUSD to 0.95 in the weeks ahead and see the potential for the EUR to stay weaker for longer vs. the USD.”

• Western Texas Intermediate (WTI) jumps more than 4%, courtesy of a weaker US Dollar.
• Changes in China’s Covid-19 zero-tolerance stance will support higher oil prices.
• WTI could rally on OPEC’s cut to crude oil output and the EU’s ban on Russia’s oil.

The US crude oil benchmark, also known as Western Texas Intermediate (WTI), climbed sharply following the release of US employment data, which exceeded estimates, while the Unemployment Rate shows easing signs in the labor market as the Federal Reserve expects. At the time of writing, WTI exchanges hands at $91.70 per barrel after hitting a three-week high at $92.55.

The US Dollar is on the defensive, despite a goodish US employment report

The US Dollar remains soft across the board, weighed by the October US Nonfarm Payrolls report, a tailwind for dollar-denominated assets. The US economy added 261K jobs to the economy crushing the 200K foreseen by analysts, but an uptick in the unemployment rate to 3.7% from 3.5% in the previous month, increased traders speculations that the Fed would tighten but at a slower pace.

Aside from this news that Chinese authorities are looking to relax the Covid-19 restrictions would benefit oil prices, as one of the top epidemiologists said at a local investment conference that he expects “substantial changes” to the Covid-19 zero-tolerance policy.

Elsewhere, the US Dollar Index, which tracks the greenback’s performance against most G8 currencies, tumbles more than 1.50%, at 111.102, after hitting fresh two-week highs at 113.148, in the Federal Reserve aftermath.

Another factor that would keep WTI’s prices heading north is the Organization of Petroleum Exporter Countries and its allies, known as OPEC, which cut crude-oil output by almost 2 million BPD. Worth noting, the US stockpiles slid, as reported earlier in the week by the US Energy Information Administration (EIA).

The above-mentioned factors lifted WTI prices as the US released oil from the Strategic Petroleum Reserve (SPR). Nevertheless, the Eurozone ban on Russia’s oil, to begin on December 5, would put further stress on the oil supply, meaning that it could be possible that WTIs hit $100 per barrel at the end of the year.

WTI Key Technical Levels

GBPUSD dropped after a somewhat more dovish than expected BoE announcement. Cable is likely to face further downward pressure, given the cyclical divergence between the UK and the US, in the view of economists at HSBC.

Underlying message is dovish

“Although the BoE matched the 75 bps hike delivered by the Fed, there was a clear point of difference about where rates could peak in the future. The BoE noted that, although further rate hikes would be required, this would ultimately mean going ‘to a peak lower than priced into financial market’. This is in direct contrast to the Fed which made the observation that guidance around the terminal rate would likely need to move higher, even if the pace of hikes was likely to slow. All in all, this is a very sobering message for the UK economy and for the GBP.”

“We see GBPUSD moving lower into year-end 2022, given this ongoing cyclical divergence between the US and UK economies and rate profiles.”

• US Dollar extends losses during the American session.
• NFP surpasses expectations, but does not help dollar.
• USDCHF erases most weekly gains, back under parity.

The USDCHF is falling almost two hundred pips on Friday, on the worst performance in weeks, amid a broad-based Dollar slide. The better-than-expected US jobs numbers did not help the dollar, that is ending the week pointing to further weakness.

The pair recently hit a fresh two daily low at 0.9940 and it remains with a bearish bias. The next support stands around 0.9920. The reversal from the 1.0150 area, that again capped the upside, is firm.

Dollar down despite NFP

The US official employment report showed numbers above expectations, although the slowest monthly gain in jobs since December 2020. The labor market remains healthy.

The US Dollar initially rose following the NFP but then reversed sharply, resuming the decline. “The currency market looks to be more concerned about speculation of a relaxation of China's zero COVID policy than a firmer jobs report or higher Fed terminal rate, which may be more influential in triggering some positioning adjustments. The easy phase of the USD's bid is behind us, but the onus will be on regional prospects to undermine the USD. Near-term, we think there may be more noise-than-signal in the FX space”, commented analysts at TD Securities.

The US dollar is still marginally higher for the week but is far from the highs, on a busy week that included a 75 basis points rate hike from the Federal Reserve. Next week, on Tuesday are US mid-term elections and on Thursday CPI data is due. Inflation numbers will be the highlight of the week and will likely impact markets.

Technical levels

Canadian employment surged 108K in October, defying expectations for a slowdown. CAD strengthened following the number and is set to remain resilient in the short-term also thanks to speculation of China re-opening, economists at TD Securities report.

Canada's random number generator strikes again

“The Canadian economy added 108K jobs in October, smashing expectations for a 10K print, following the muted performance over the last six months. Details were even more hawkish with full-time employment driving job growth, alongside a 0.2pp increase to the participation rate as wages firmed by 0.4pp.”

“The CAD caught a solid bid following the surprise, which added to the positive momentum it gained overnight following growing speculation that China will relax its zero-COVID policy. Together, we think it is a positive story for CAD, at least in the short-term.”

In an interview with CNBC on Friday, Richmond Fed President Thomas Barkin said that the US labor market was still tight and added that they were not getting much help on the labor supply side, as reported by Reuters.

Key takeaways

"It will be hard for people who have fought hard to raise prices to back off."

"Not sure I know what we'll do in December, many indicators still to come."

"Could be a potentially higher end-point for rates even if slower."

"If inflation were to persist, would need to respond appropriately."

"We need to get inflation down to target and do whatever we need to do to do that."

Market reaction

The US Dollar Index continues to push lower in the American session and was last seen losing 1.65% on the day at 111.12.

• NZDUSD extends its daily gains above 0.5900 following an upbeat US NFP report.
• The United States economy added more than 260K jobs, beating estimates, but wages increased, adding to inflationary pressures.
• The US Dollar remains offered, despite printing a solid employment report, down 1.45% as shown by the US Dollar Index.

The NZDUSD advances and pierces the 50-day Exponential Moving Average (EMA) following the release of upbeat US employment data, while wages rose steadily, which would not deter the US Federal Reserve from tightening monetary policy conditions. At the time of writing, the NZDUSD is trading at 0.5902.

US Dollar remains heavy following October’s US employment situation

The US Dollar continues to weaken, even though the US jobs report was better than expected, with the Nonfarm Payrolls report for the last month exceeding estimates of 200K, increased by 261K. Even though the figures were solid, they came below September’s upward revision to 315K. Of note is that Average Hourly Earnings stood steadily at around 4.7%, as predicted, but lower than the previous month’s 5% jump.

Regarding the Unemployment Rate, it jumped as the Federal Reserve wanted, from 3.5% in September to 3.7% in October.

The Federal Reserve would continue to tighten conditions given October’s labor market figures. Albeit Jerome Powell and Co. revealed that they would slow the pace of interest-rate increases, they would look for the next week’s Consumer Price Index (CPI) for October, alongside the University of Michigan (UoM) Consumer sentiment and inflation expectations.

NZDUSD Market’s reaction

On the US Nonfarm Payrolls release, the NZDUSD edged towards the 0.5800 figure, beneath the confluence of the 50 and 100-hour Exponential Moving Averages (EMAs), before rallying towards fresh two-day highs at around 0.5900, hurdling on its way north, the R1 and R2 daily pivot levels, but shy of the weekly high at 0.5941.

The Relative Strength Index (RSI) is pushing higher towards overbought conditions, though it remains short of reaching the 80 level, used by most traders as the most-extreme overbought condition when an asset is in a strong uptrend. Nevertheless, caution is warranted as the major approaches the R3 daily pivot at 0.5920, opening the door for NZD buyers to book profits in the event of a pullback.

Boston Federal Reserve President Susan Collins said on Friday that it is time for the Fed to shift its focus from the size of rate hikes to the "ultimate "destination," as reported by Reuters.

Additional takeaways

"Fed entering a new phase for monetary policy tightening cycle."

"Inflation still too high, Fed must restore price stability."

"Signs inflation surge is starting to moderate."

"Smaller rate hikes may be likely to become more appropriate in future."

"Still open to 75-basis-point hikes if needed."

"Fed policy now in restrictive territory."

"Premature to say how far Fed will need to hike rates."

"I don't believe big slowdown is needed to achieve price stability."

"Fed will need to balance risks to outlook more as it moves forward."

"Optimistic for future path of the economy."

Market reaction

The US Dollar stays under heavy selling pressure and the US Dollar Index was last seen losing 1.5% on the day at 111.25.

Is China about to open up? If China opens up symmetrically it would once again put pressure on the services balance of China's current account, leading to more and not less pressure on the Yuan, according to economists at TD Securities.

China’s opening is not going to be a panacea for the global economy and markets

“In terms of markets impact if China opens up symmetrically i.e. allows more Chinese to travel outside of China and not just allows more inward traffic, it would once again put pressure on the services balance of China's current account, leading to more and not less pressure on the CNY. As such, we maintain our view of CNY underperformance both vs. USD and on a trade-weighted basis. Conversely, it would be positive news for the likes of THB, and other tourism related currencies in the region including SGD.” 

“For the rest of the world, clearly a full opening up and dismantling of zero-Covid, would bode well, especially if Chinese growth reaches 6-6.5% as noted above, but this is not our base case. Moreover, even if growth does ramp up, China's domestically-focussed stimulus, ongoing domestic structural constraints, and weaker trade means that China opening is not going to be a panacea for the global economy and markets.”

• GBPUSD challenges the key 1.1300 zone on Friday.
• The dollar remains offered and allows the bounce in Cable.
• US Nonfarm Payrolls surprised to the upside in October.

The Sterling regains the balance and sponsors the rebound in GBP/USD to the vicinity of the 1.1300 mark on Friday.

GBP/USD stronger on risk-on trade

GBPUSD leaves behind to sessions in a row with losses and manages to advance to the boundaries of 1.1300 the figure at the end of the week, where some initial resistance appears to have turned up.

The broad-based appetite for the risk-associated universe lent the Quid extra legs on Friday and helped the pair recoup part of the BoE-induced sell-off recorded on Thursday.

Indeed, the greenback remains well on the defensive despite the US economy created more jobs than expected in October (261K), while the Unemployment Rate edged higher to 3.7%.

In the UK docket, the Construction PMI improved to 53.2 in October (from 52.3), while BoE Chief Economist H.Pill suggested earlier in the session that markets should “re-anchor” their expectations around the policy rate following the recent political/financial effervescence.

GBP/USD levels to consider

As of writing, the pair is gaining 0.82% at 1.1248 and a breakout of 1.1375 (55-day SMA) would open the door to 1.1645 (monthly high October 27) and then 1.1690 (100-day SMA). On the other hand, the next support emerges at 1.1142 (weekly low November 4) followed by 1.0923 (monthly low October 12) and finally 1.0356 (2022 low September 26).

• USDJPY comes under some selling pressure amid broad-based USD weakness.
• The mixed US jobs data does little to impress the USD bulls or lend any support.
• The risk-on impulse and the Fed-BoJ policy divergence should limit the downside.

The USDJPY pair comes under some selling pressure during the early North American session and drops to a fresh daily low in the last hour. Spot prices, however, quickly recover a few pips from sub-147.00 levels, though remain in the negative territory amid the heavily offered tone surrounding the US Dollar.

In fact, the USD Index retreats further from a two-week high touched the previous day in reaction to the mixed US monthly employment details, which, in turn, is seen exerting pressure on the USDJPY pair. The closely-watched NFP report showed that the US economy added 261K new jobs in October against the 200K estimated. Furthermore, the previous month's reading was also revised higher to 315K from the 263K. That said, a slight disappointment from the unemployment rate, which rose to 3.7%, overshadows the upbeat headline prints and weighs on the greenback.

Furthermore, speculations that Japanese authorities might intervene again to soften any steep fall in the domestic currency contribute to offered tone surrounding the USDJPY pair. That said, the risk-on impulse - as depicted by a strong rally in the equity markets - should keep a lid on any further gains for the safe-haven JPY. Apart from this, a more hawkish stance adopted by the Federal Reserve should act as a tailwind for the greenback. This, in turn, should help limit the downside for the major and warrants some caution for aggressive bearish traders.

It is worth recalling that Fed Chair Jerome Powell smashed expectations for a dovish pivot and said on Wednesday that it was premature to discuss a pause in the rate-hiking cycle. Powell added that the terminal rate will still be higher than anticipated, which remains supportive of elevated US Treasury bond yields. In contrast, the Bank of Japan, so far, has shown no inclination to hike interest rates and reiterated that it will continue to guide the 10-year bond yield at 0%. This results in a further widening of the US-Japan rate differential and favours the USDJPY bulls.

Technical levels to watch

• The index losses further ground and approaches 111.50.
• The selling pressure gathers traction after solid NFP figures.
• US yields lose momentum and retreat from peaks.

The USD Index (DXY), which tracks the greenback vs. a basket of its main currencies, retreats markedly and drops well south of the 112.00 at the end of the week.

USD Index weaker despite Payrolls

The index sets aside two consecutive daily pullbacks and breaks decisively below the key 112.00 support on the back of the renewed and intense appetite for the risk complex on Friday.

In fact, solid prints from US Nonfarm Payrolls failed to motivate the greenback to reverse course despite the labour market remains tight. This scenario is supportive of the continuation of the Fed’s normalization process via extra interest rate hikes in the upcoming months.

Back to the calendar, the US economy added 261K jobs during last month, although the jobless rate rose to 3.7% (from 3.5%) and Average Hourly Earnings came in above estimates after expanding 0.4% vs. the previous month.

What to look for around USD

The irruption of the selling bias in the dollar drags the index well south of the 112.00 level at the end of the week.

In the meantime, the firmer conviction of the Federal Reserve to keep hiking rates until inflation looks well under control regardless of a likely slowdown in the economic activity and some loss of momentum in the labour market continues to prop up the underlying positive tone in the buck.

Looking at the more macro scenario, the greenback also appears bolstered by the Fed’s divergence vs. most of its G10 peers in combination with bouts of geopolitical effervescence and occasional re-emergence of risk aversion.

Key events in the US this week: Nonfarm Payrolls, Unemployment Rate (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot could emerge in … 2024? Geopolitical effervescence vs. Russia and China. US-China persistent trade conflict.

USD Index relevant levels

Now, the index is retreating 1.20% at 111.62 and the breakdown of 109.53 (monthly low October 27) would open the door to 109.35 (weekly low September 20) and finally 107.68 (monthly low September 13). On the other hand, there is an initial resistance at 113.88 (monthly high October 13) seconded by 114.76 (2022 high September 28) and then 115.32 (May 2002 high).

• The AUDUSD soars more than 2% on Friday and prepares to finish the week with gains of 0.50%.
• The US Nonfarm Payrolls report exceeded estimates, while the Unemployment Rate pushed upwards, weakening the USD and bolstering the AUD.
• AUDUSD Price Analysis: Gains 150-pips and consolidates around 0.6440-50 as the RSI enters the overbought territory.

The AUDUSD is surging toward 0.6420s following the release of US employment data, which underscores Fed worries about the narrow labor market, with the United States economy adding more jobs than expected, while the Average Hourly Earnings remained unchanged close to 5% YoY, adding to inflationary pressures. At the time of writing, the AUDUSD is trading at around 0.6440-55 after hitting a daily low of 0.6285.

The AUDUSD jumped on upbeat US Nonfarm Payrolls report

On Friday, the US Department of Labor reported that the US economy added 261K jobs in October, smashing estimates of 193K, justifying the need for further Federal Reserve (Fed) aggression, even though the Federal Funds rate (FFR) is already at the 3.75-4% range. Although Fed Chair Jerome Powell mentioned the bank’s intention to slow the pace of rate increases, he said that the peak of rates would be higher than September’s Summary of Economic Projections (SEP) report.

Digging a little deep into the report, the Unemployment Rate rose by 3.7%, shocked by a lower participation rate, while Average Hourly Earnings remained unchanged at 4.7% YoY.

Market’s reaction

The AUDUSD tanked on the headline release, as shown by the 5-minute chart, towards 0.6344 and shifted gears, rallying aggressively, clearing the psychological 0.6400 figure, and extending its gains towards the daily high at around 0.6452. Traders should be aware that the Relative Strength Index (RSI) sits at 83 at overbought conditions, suggesting that the AUDUSD might pull back before resuming its upward bias.

AUDUSD 5-minute chart

GBPUSD held near 1.15 the past week before dipping to 1.12 on a dovish 75 basis points hike by the BoE. Economists at Westpac see Cable trading at 1.20 and 1.27 by end-2023 and end-2024, respectively.

Market confidence and reduced energy and inflation risks expected to win out

“The road ahead is fraught with risk as Prime Minister Rishi Sunak’s Government hold off on further stimulus and likely tighten their stance while the economy is very weak.” 

“Inevitably, market confidence and reduced energy and inflation risks are expected to win out, sending the GBPUSD higher – to 1.20 and 1.27 come end-2023 and end-2024.”

• USDCAD plummets back closer to the weekly low and is pressured by a combination of factors.
• A rise in the US jobless rate overshadows the upbeat NFP print and weighs heavily on the USD.
• Stellar Canadian jobs data, rallying oil prices underpin the Loonie and add to the selling bias.

The USDCAD pair adds to its heavy intraday losses and sinks the weekly low, below mid-1.3500s in reaction to the US/Canadian employment details.

The US Dollar maintains its heavily offered tone after the closely-watched US NFP report showed that the added 261K jobs in October, much higher than the 200K anticipated. Adding to this, the previous month's reading was revised higher from 263K to 315K. This, however, was offset by a slight disappointment from the unemployment rate, which rose to 3.7% during the reported month against expectations for an uptick to 3.6% from 3.5% in September. The mixed data fails to impress the US Dollar bulls or lend any support to the USDCAD pair.

The Canadian Dollar, on the other hand, gets a strong boost from mostly upbeat Canadian jobs data. Statistics Canada reported that the economy added 108.3K jobs in October, smashing expectations for a 10K rise by a huge margin. Additional detail revealed that the jobless rate held steady at 5.2% against expectations for an uptick to 5.3%. This comes amid an intraday rally in crude oil prices, which is seen as another factor underpinning the commodity-linked Loonie and further contributes to the USDCAD pair's steep intraday decline.

Apart from the aforementioned fundamental factors, the latest leg down witnessed over the past hour or so could also be attributed to some technical selling below the 1.3600 mark. Hence, it remains to be seen if the downfall marks a fresh bearish breakdown or is seen as a buying opportunity amid a more hawkish stance adopted by the Federal Reserve. Nevertheless, the USDCAD pair remains on track to end in the red for the third successive week.

Technical levels to watch

• US Nonfarm Payrolls for October exceeded forecasts of 193K.
• The US Unemployment Rate edged higher, at around 3.7%.
• Gold Price Analysis: Dived at the headline but resumed its early gains.

Gold price seesaws around $1648 after a measure of employment in the United States showed the economy added more jobs than expected, as the US Department of Labor reported, while the US Dollar weakened. US Treasury yields rose, though this did not deter Gold from clinging to earlier gains. At the time of writing, XAUUSD is trading at around $1640-$1660 in a volatile session

US Nonfarm Payrolls crushed expectations, and the Unemployment Rate rises

The Bureau of Labor Statistics (BLS) revealed that US Nonfarm Payrolls for October rose by 261K above estimates of 193K, suggesting that the US Federal Reserve will need to keep lifting rates due to the tightness of the labor market. Given that the US central bank hiked 0.75% for the fourth time in the year and acknowledged an overheated labor market, the December meeting could be live, where the Fed could weigh its options by half or three-quarters of a percent.

In the same report, the Unemployment Rate jumped by 3.7% due to lower participation, and Average Hourly Earnings were unchanged at 6.7%.

Markets’ reaction

XAUUSD price dived towards $1641.16, shy of the 200-EMA as shown by the 5-minute chart, before bouncing off and climbing towards the high $1650s, as the US Dollar weakener, breaking on its way up, the 50-EMA and the 20-EMA, each at  $1649.88 and $1651.82, respectively. Even though,  to further extend its gains, XAUUSD lacks the strength to re-test the weekly high of $1169.52, as the Relative Strength Index (RSI) at overbought conditions suggests a pullback towards the $1650 area is on the cards.

XAUUSD 5-minute chart

Gold Key Technical Levels

• Employment in Canada grew at a much stronger pace than expected in October.
• USDCAD trades deep in negative territory below 1.3550.

The Unemployment Rate in Canada remained unchanged at 5.2% in October, the data published by Statistics Canada revealed on Friday.

Net Change in Employment arrived at +108.3K, surpassing the market expectation of 10K by a wide margin. Additionally, the Participation Rate improved to 64.9% from 64.7.

"Year-over-year growth in the average hourly wages of employees remained above 5% for a fifth consecutive month in October, rising 5.6% (+$1.68 to $31.94) compared with October 2021 (not seasonally adjusted)," Statistics Canada further noted in its press release.

Market reaction

USDCAD declined sharply with the initial reaction and was last seen trading at 1.3544, where it was down 1.5% on a daily basis.

• EURUSD keeps the bid tone above the 0.9800 mark on Friday.
• US Nonfarm Payrolls surprised to the upside in October.
• The Unemployment Rate climbed to 3.7% (from 3.5%).

EURUSD extends the daily upside to the 0.9810/15 band, or daily highs, in the wake of another solid report from US Nonfarm Payrolls on Friday.

EURUSD looks supported near 0.9750

EURUSD briefly revisited the mid-0.9700s soon after Nonfarm Payrolls showed the US economy added 261K jobs during October, surpassing initial estimates for a gain of 200K jobs. The September reading was revised up to 315K (from 263K).

Further data saw the Unemployment Rate ticked higher to 3.7% (from 3.5%) and the key Average Hourly Earnings – a proxy for inflation via wages – rose 0.4% MoM and 4.7% from a year earlier. Additionally, the Participation Rate receded a tad to 62.2% (from 62.3%).

Despite the strong Payrolls keep supporting the case for the continuation of the tightening cycle by the Federal Reserve, the greenback remains on the defensive, while US yields extend their march north.

What to look for around EUR

EURUSD manages to regain some poise – and the 0.9800 mark - despite the stronger-than-expected Payrolls for the month of October.

In the meantime, price action around the European currency is expected to closely follow dollar dynamics, geopolitical concerns and the Fed-ECB divergence. The recent decision by the Fed to hike rates and the likelihood of a tighter-for-longer stance now emerges as the main headwind for a sustainable recovery in the pair (if it was any at all).

Furthermore, the increasing speculation of a potential recession in the region - which looks propped up by dwindling sentiment gauges as well as an incipient slowdown in some fundamentals – adds to the fragile sentiment around the euro in the longer run.

Key events in the euro area this week: EMU/Germany Final Services PMI, ECB Lagarde (Friday).

Eminent issues on the back boiler: Continuation of the ECB hiking cycle vs. increasing recession risks. Impact of the war in Ukraine and the persistent energy crunch on the region’s growth prospects and inflation outlook.

EURUSD levels to watch

So far, the pair is gaining 0.50% at 0.9794 and faces the next resistance at 0.9975 (weekly high November 2) seconded by 1.0093 (monthly high October 27) and finally 1.0197 (monthly high September 12). On the other hand,  a breach of 0.9704 (weekly low October 21) would target 0.9631 (monthly low October 13) en route to 0.9535 (2022 low September 28).

UK will stand out from other key G10 economies and is set to underperform. Thus, economists at MUFG expect further GBP depreciation, with the GBPUSD trading below the 1.10 mark.

Pound remains very vulnerable to the downside for now

“The Pound remains very vulnerable to the downside for now. The US and even the eurozone look set to perform better than the UK and that economic underperformance relative to most of the rest of the G10 will likely be reflected most easily through GBP depreciation.” 

“The grim GDP forecasts from the BoE don’t even incorporate the coming fiscal consolidation to be announced on 17th November.”

“We remain bullish on the US Dollar, a view we remain confident on after the FOMC meeting yesterday. Hence, the greater traction for GBP weakness will remain through GBPUSD. A period trading back below the 1.1000 level looks increasingly likely.”

• GBPUSD comes under renewed selling pressure on Friday and drops to a fresh two-week low.
• The USD gains some traction in reaction to the upbeat NFP report and exerts some pressure on Cable.
• The lack of follow-through selling warrants some caution before placing aggressive bearish bets.

The GBPUSD pair struggles to preserve its intraday gains and drops to a fresh daily low, below mid-1.1100s during the early North American session.

The US Dollar catches some bids and recovers a major part of its early lost ground in reaction to the upbeat US employment details, which, in turn, attracts fresh sellers around the GBPUSD pair. In fact, the headline NFP showed that the US economy added 261K new jobs in October, better than the 200K estimated.

Adding to this, the previous month's reading was revised higher to 315K from 263K. That said, the jobless rate rose more than anticipated, to 3.7% from 3.5%. Nevertheless, the data reaffirms the Fed's hawkish outlook, which remains supportive of elevated US Treasury bond yields and underpins the buck.

The British Pound, on the other hand, continues to be weighed down by the Bank of England's dovish rate hike on Thursday, which suggests that the path of least resistance for the GBPUSD pair is to the downside. Bears, however, might wait for acceptance below mid-1.1100s before placing fresh bets.

Technical levels to watch

Having reached a new cycle (and multi-decade) high of 114.1 in late September, the US Dollar Index (DXY) has since been locked in a relatively tight trading range between 110 and 113. Economists at Westpac expect that the US Dollar peak is behind us.

The weight of reality is hitting the USD

“Expectations and risks related to inflation continue to dictate moves within the range; although, over the past month, participants have been showing greater concern over the consequences of tight policy for the economy, and consequently a growing belief that the peak in rates is nigh. Available activity data certainly argues for this being the case.”

“Although the direction of travel for the US economy, and by association consumer inflation, is clear, markets are still apprehensive to step out and take risk, particularly while the FOMC holds onto its hawkish stance, evinced again by Chair Powell this week. Into year-end, we expect this to remain the case. 2023 is likely to be very different, however.”

“From 113, we look for DXY to fall to 103 by end-2023 and 96 end-2024 – declines of 9% and 15% from spot – with Euro and Sterling key to the result.” 

Nonfarm Payrolls in the US rose by 261,000 in October, the data published by the US Bureau of Labor Statistics revealed on Friday. This reading came in much higher than the market expectation of 200,000. Additionally, September's reading got revised higher to 315,000 from 263,000.

Further details of the publication revealed that the Unemployment Rate edged higher to 3.7% from 3.5% and the annual wage inflation, as measured by the Average Hourly Earnings, declined to 4.7% from 5%. Finally, the Labor Force Participation Rate inched lower to 62.2% from 62.3%.

Follow our live coverage of market reaction to the US jobs report.

Market reaction

With the immediate reaction, the US Dollar Index erased a portion of its daily losses and was last seen trading at 112.55, where it was down 0.37% on a daily basis.

Whose monetary policy is more attractive? A comparison of the Fed and ECB shows the US Dollar is more attractive than the Euro, economists at Commerzbank report.

Dollar holds advantage over the Euro

“Fed Chair Jay Powell has pointed out that the Fed is aiming for a key rate level above inflation medium-term. That means the Fed will only stop hiking interest rates or lower them again once it can be sufficiently certain that inflation is easing notably. The impression the ECB is giving to observers is completely different. One gets the impression that Europe’s central bankers have to be forced by high inflation data to get them to hike rates. From the FX market’s point of view that means the Dollar is at an advantage against the Euro.”

“If inflation were to not fall or ease much less than the central banks expect the ECB would always be chasing inflation developments, would stand little chance of anchoring it and would produce negative real interest rates medium-term as a result. The Fed on the other hand would hike its key rate more significantly than it is planning so far. In the end, US Dollar real interest rates would also be positive in that scenario.”

“What is decisive from the FX market’s point of view depends on the rule the central bank applies to set its rates. The Fed’s rule seems to be more suited for protection against negative inflation surprises. That too makes the Dollar attractive, not just the current rate advantage.”

USDCAD will be a function of broad USD variation and US Nonfarm Payrolls. A mix of weaker CAD data plus stronger US NFP will leave sticky resistance around 1.38 vulnerable, economists at TD Securities report.

On-consensus CAD jobs unlikely to do much for the Loonie

“An on-consensus print for jobs is unlikely to do much for the CAD. Instead, we think the focus will be on US payrolls. That said, CAD has been rather resilient on the crosses so an on-consensus print for payrolls will likely see that extend.” 

“Payrolls data will be rather important for USDCAD as the USD leg has been very dominant in driving variation in the pair. But we see a limit to USD dips with a resolutely hawkish Powell. Slippage in Canadian data is likely to become magnified in USDCAD rather than on CAD crosses, but we think over time, this will reverse course as the acute pressures Canada faces are consumer related.”

“1.38 will be sticky resistance, but we think it will be liable to break on stronger US and weaker CAD data.”

See:

• NFP Preview: Forecasts from 10 major banks, further significant job growth

• Canadian Jobs Preview: Forecasts from five major banks, quite tepid jobs gain in October

Canadian employment details overview

Statistics Canada is scheduled to publish the monthly employment report for October later this Friday at 12:30 GMT. The Canadian economy is anticipated to have added 10K jobs during the reported month, down from the 21.1K rise reported in September. The unemployment rate is anticipated to edge higher from 5.2% to 5.3% in October.

According to analysts at NBF: “Recent economic indicators point to a slowdown in growth in Canada, a phenomenon that could be reflected in employment data. Layoffs may well have remained low during the month, but we believe this could have been offset by a slowdown in hiring amid declining small business confidence. Our call is for a 5K increase. Despite this gain, the unemployment rate may increase from 5.2% to 5.4%, assuming the participation rate rose one tick to 64.8% and the working-age population grew at a strong pace.”

How could the data affect USDCAD?

The data is more likely to be overshadowed by the simultaneous release of the closely-watched US jobs report - popularly known as NFP. That said, a significant divergence from the expected readings should influence the Canadian dollar and provide some meaningful impetus to the USDCAD pair. In the meantime, a sharp intraday rise in crude oil prices, to a nearly one-month high, underpins the commodity-linked Loonie. This, along with a modest US Dollar pullback from a two-week high touched on Thursday, is seen exerting heavy downward pressure on the major.

Strong domestic data should provide an additional lift to the Canadian dollar and pave the way for a further intraday depreciating move for the USDCAD pair. Spot prices might then turn vulnerable to weaken further below the 1.3600 mark and aim back to test the 1.3500 psychological mark, which now coincides with the 50-day SMA.

Conversely, any disappointment from the Canadian jobs data and (or) upbeat US NFP report should assist the USDCAD pair to attract fresh buying. Any attempted recovery, however, might confront some resistance near the 1.3675-1.3680 region. This is closely followed by the 1.3700 round figure and the next relevant hurdle near the 1.3735-1.3740 region. A sustained strength beyond the latter will negate any near-term negative bias and allow spot prices to aim back to conquer the 1.3800 mark.

Key Notes

  •  Canadian October Jobs Preview: Labor market upturn in the doldrums

  •  Canadian Jobs Preview: Forecasts from five major banks, quite tepid jobs gain in October

  •  USDCAD remains heavily offered below mid-1.3600s ahead of US/Canadian jobs data

About the Employment Change

The employment Change released by Statistics Canada is a measure of the change in the number of employed people in Canada. Generally speaking, a rise in this indicator has positive implications for consumer spending which stimulates economic growth. Therefore, a high reading is seen as positive, or bullish for the CAD, while a low reading is seen as negative or bearish.

About the Unemployment Rate

The Unemployment Rate released by Statistics Canada is the number of unemployed workers divided by the total civilian labour force. It is a leading indicator for the Canadian Economy. If the rate is up, it indicates a lack of expansion within the Canadian labour market. As a result, a rise leads to weaken the Canadian economy. Normally, a decrease of the figure is seen as positive (or bullish) for the CAD, while an increase is seen as negative or bearish.

Gold climbed toward $1,650 despite the hawkish Fed tone. However, the recovery is set to stall, strategists at Commerzbank report.

Gold under pressure following the hawkish remarks made by the Fed chair

“Fed Chair Jay Powell stressed that the speed of rate hikes was not so important anymore and that the key question was the level at which interest rates would finally peak. And this, Fed members now believe, looks set to be higher than they had assumed in September.”

“The Fed’s goal is to bring real interest rates into positive territory. This means that the key rate will remain at a high level until such time as the rate of inflation has fallen below it.”

“Generally speaking, the FOMC meeting turned out to be more hawkish than expected, which was then reflected in higher interest rate expectations and a firmer dollar and ultimately caused the Gold price to fall. Shortly before hitting its yearly low, Gold did a U-turn and began climbing again, though today’s US labour market report could put the brakes on its recovery again.”

See – NFP Preview: Forecasts from 10 major banks, further significant job growth

US monthly jobs report overview

Friday's US economic docket highlights the release of the closely-watched US monthly jobs data for October. The popularly known NFP report is scheduled for release at 12:30 GMT and is expected to show that the economy added 200K jobs during the reported month, down from the 263K in September. The unemployment rate is anticipated to have edged higher from 3.5% to 3.6% in October. Apart from this, investors will take cues from Average Hourly Earnings, which could offer fresh insight into the possibility of a further rise in inflationary pressures.

Analysts at Societe Generale sound more optimistic and offer a brief preview of the important US macro data: “For October, we expect NFP to rise by 300K, faster than the 263K reported in September. Payrolls grew an average of 562K per month in 2021 and in the first half of 2022 they grew at a 444K pace. The unemployment rate is expected to hold steady at 3.5%, but we view a further decline to 3.4% as highly likely very soon. With employment gains above a 150-175K range per month, there is pressure for the unemployment rate to drop. We estimate the 150-175K pace as representing growth in the working-age population.”

How could the data affect EURUSD?

Ahead of the key release, the US Dollar retreats from a nearly two-week high touched the previous day and assist the EURUSD pair to regain some positive traction on Friday. Weaker US employment details might prolong the USD profit-taking slide and provide an additional lift to the major. That said, a more hawkish stance adopted by the Federal Reserve should limit deeper losses for the greenback.

Hence, any positive surprise should be enough to trigger a fresh leg up for the USD and attract fresh sellers around the EURUSD pair. This, in turn, suggests that any subsequent move up might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

Eren Sengezer, Editor at FXStreet, offers a brief technical overview and outlines important technical levels to trade the major: “EURUSD is facing interim resistance at 0.9800 (static level, psychological level) ahead of 0.9820 (200-period SMA on the four-hour chart, descending trend line). A four-hour close above the latter could be seen as a bullish sign and attract buyers. In case the Relative Strength Index (RSI) indicator rises above 50 on such development, the pair could extend its recovery toward 0.9860 (100-period SMA) and 0.9900 (psychological level).”

“On the downside, near-term support seems to have formed at 0.9740 (static level) before 0.9700 (psychological level, static level) and 0.9630 (Oct. 13 low),” Eren adds further.

Key Notes

  •  NFP Preview: Forecasts from 10 major banks, further significant job growth

  •  EURUSD Forecast: Euro needs to overcome 0.9820 to extend rebound

  •  EURUSD Price Analysis: Oversold oscillators in an uptrend structure triggers a bargain buy

About the US monthly jobs report

The nonfarm payrolls released by the US Department of Labor presents the number of new jobs created during the previous month, in all non-agricultural business. The monthly changes in payrolls can be extremely volatile, due to its high relation with economic policy decisions made by the Central Bank. The number is also subject to strong reviews in the upcoming months, and those reviews also tend to trigger volatility in the forex board. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish), although previous months reviews and the unemployment rate are as relevant as the headline figure.

The Bank of England (BoE) hiked by 75 basis points but several details leaned in a dovish direction triggering a substantial fall in the Pound (-1.5% vs USD). Economists at ING expect GBPUSD to retest the 1.10 level.

A very dovish hike

“While the BoE hiked by 75 bps, it seemed to tweak the policy message to the dovish side as much as reasonably possible. The bottom line is that the BoE is essentially shutting the door to another 75 bps, and we expect a 50 bps hike in December.”

“The fiscal rigour brought by the new UK government may have already had a beneficial effect on the pound, and now the size of the current UK recession may become a primary currency driver. Indeed, the downside risks are still quite significant, and next week's GDP numbers will surely be watched quite closely: consensus is currently around a 0.4% quarter-on-quarter contraction.”

“Risks are skewed towards a re-test of 1.1000 in Cable over the next few days, with today's US payrolls possibly adding pressure on the pair.”

• AUDUSD regains positive traction on Friday amid broad-based USD weakness.
• A positive risk tone undermines the buck and benefits the risk-sensitive Aussie.
• The Fed’s hawkish outlook should limit the USD losses ahead of the NFP report.

The AUDUSD pair catches some bids on Friday and stalls this week’s sharp retracement slide from the vicinity of the 0.6500 psychological mark. The pair sticks to its intraday gains through the first half of the European session and is currently placed near the daily peak, just above mid-0.6300s.

The US Dollar stalls the post-FOMC rally and retreats from a two-week high touched on Thursday, which, in turn, offers some support to the AUDUSD pair. A generally positive tone around the equity markets is seen weighing on the safe-haven buck and benefitting the perceived riskier Aussie. The downside for the USD, however, seems limited amid elevated US Treasury bond yields, bolstered by a more hawkish stance adopted by the Federal Reserve.

It is worth recalling that Fed Chair Jerome Powell downplayed speculations for a dovish pivot and said on Wednesday that it was premature to discuss a pause in the rate-hiking cycle. This, in turn, pushed the yield on the rate-sensitive 2-year US government bond closer to the 5% psychological mark, or a 15-year high on Thursday. Furthermore, the benchmark 10-year US Treasury note holds steady above the 4.0% threshold and favours the USD bulls.

The aforementioned fundamental backdrop warrants some caution before placing aggressive bullish bets around the AUDUSD pair and positioning for any further gains ahead of the crucial US NFP report. The data is expected to show that the economy added 200K positions in October and the jobless rate edged higher to 3.6% from the 3.5% previous. The data will influence the USD and produce short-term trading opportunities on the last day of the week.

Technical levels to watch

In the view of economists at Westpac, the Jpapense Yen has capacity to reverse recent losses, at least partially. They forecast USDJPY at 136 by the end of next year.

USDJPY seen at 126 by the end of 2024

“Although we expect the Yen to benefit from the coming US Dollar downtrend, it is likely to lag, with risks to remain skewed against the currency.” 

“Unsurprisingly, the Bank of Japan continues to dismiss any and every call for even a hawkish bias let alone a policy tightening. Interest rate differentials with the rest of the world are then set to remain wide for the foreseeable future.” 

“What the Yen has on its side is the chance to benefit from the economic development of Asia. If Japanese industry leverages this momentum, activity gains could support a material reversal in Yen, along with risk sentiment. For the time being however, we remain cautious, forecasting only a staggered and partial unwind of 2022’s USDJPY gains, from 148 to 136 and 126 end-2023 and end-2024. It is worth repeating that risks to this view are skewed up (i.e. towards a weaker Yen).”

• GBPUSD gains some positive traction on Friday and reverses a part of the overnight losses.
• A positive risk tone is seen weighing on the safe-haven USD and lending support to the pair.
• The BoE’s gloomy outlook for the UK economy could act as a headwind for the British Pound.
• A more hawkish stance by the Fed to limit the USD losses and cap the pair ahead of the NFP.

The GBPUSD pair stages a goodish recovery from a two-week low, around the 1.1150 area touched earlier this Friday and maintains its bid tone through the first half of the European session. Currently placed just below mid-1.1200s, the pair, for now, seems to have stalled its recent pullback from a multi-week high amid a modest US Dollar weakness.

A generally positive tone around the equity markets turns out to be a key factor exerting some downward pressure on the safe-haven greenback. That said, elevated US Treasury bond yields, bolstered by the prospects for a further policy tightening by the Federal Reserve, should help limit the downside for the USD. In fact, Fed Chair Jerome Powell downplayed expectations for a dovish pivot and said on Wednesday that it was premature to discuss a pause in the rate-hiking cycle.

Apart from this, the Bank of England's gloomy outlook for the UK economy should act as a headwind for the British Pound and contribute to capping the GBPUSD pair. It is worth recalling that the UK central bank forecasts a recession to last for all of 2023 and the first half of 2024. The BoE on Thursday also indicated a lower terminal peak than is currently priced into markets. This, in turn, warrants some caution for aggressive bullish traders ahead of the release of the US NFP report.

The closely-watched US monthly employment data is expected to show that the economy added 200K new positions in October and the jobless rate edged higher to 3.6% from 3.5% previous. The key US macro release, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and produce some meaningful trading opportunities around the GBPUSD pair.

Technical levels to watch

European Central Bank (ECB) President Christine Lagarde reiterated on Friday that they will not let high inflation become entrenched, as reported by Reuters.

Additional takeaways

"Rate path ahead will look different depending on the contingencies we face."

"We have to raise rates to levels that will deliver our 2% medium-term inflation target."

"If we were to see, for example, inflation becoming more persistent and expectations being at risk of de-anchoring, we would need to take additional actions."

"We are seeing a faster and stronger pass-through of these shocks into prices."

"Historical evidence suggests that we should not expect slowing growth to make a significant dent in inflation."

"We are likely to see wages catching up to some extent with higher inflation."

Market reaction

EURUSD edged higher following these comments and was last seen rising 0.4% on the day at 0.9790.

EURUSD trades in positive territory early Friday and continues to edge higher toward 0.98. However, economists at ING expect the pair to return to the 0.95 level.

NFP report should continue to put pressure on EURUSD

“EURUSD remains primarily a function of Dollar moves, and today's US payrolls release should continue to put pressure on the pair.”

“Having now moved back to the trading ranges seen before the late-October correction (which has proven exceptionally short-lived), we think markets have switched back to a more structurally bearish tone on EURUSD, and a return to 0.9500 is our base case in the near term.”

See – NFP Preview: Forecasts from 10 major banks, further significant job growth

An official at the US Treasury Department said on Friday, “Treasury is continuing discussions with Russian oil price cap coalition partners to set the price cap level.”

Additional quotes

Market reaction

WTI pays little heed to the above headlines, consolidating the renewed upside below $90. The black gold was last seen trading at $89.56, up 2.52% on the day.

• A combination of factors prompts heavy selling around USDCAD on Friday.
• Rising oil prices underpin the Loonie and exert pressure amid a weaker USD.
• Recession fears and the Fed’s hawkish outlook should help limit the downside.
• Traders might also wait for the monthly jobs report from the US and Canada.

The USDCAD pair comes under heavy selling pressure on Friday and extends the previous day's retracement slide from a nearly two-week high, levels just above the 1.3800 mark. The downward trajectory remains uninterrupted through the first half of the European session and drags spot prices below mid-1.3600s

Reports that the Group of Seven (G7) rich countries agreed to set a fixed price on Russian crude exports raised concerns about tight global supplies. This, in turn, triggers a fresh leg up in crude oil prices, which underpins the commodity-linked Loonie. The US dollar, on the other hand, stalls the post-FOMC strong rally and turns out to be another factor dragging the USDCAD pair. The fundamental backdrop, however, warrants some caution before positioning for any further depreciating move.

Investors remain concerned that a recession in the United States, the world's biggest oil consumer, and China's zero-COVID policy will dent fuel demand. This might keep a lid on any meaningful upside for the commodity. Apart from this, a more hawkish stance adopted by the Federal Reserve should continue to act as a tailwind for the buck and help limit the downside for the USDCAD pair.  In fact, Fed Chair Jerome Powell said on Wednesday that it was premature to discuss a pause in the rate-hiking cycle.

Powell added that the terminal rate will still be higher than anticipated, which remains supportive of elevated US Treasury bond yields and favours the USD bulls. Traders might also prefer to wait for the release of the monthly employment details from the US and Canada, due later during the early North American session. Nevertheless, spot prices, for now, seem to have snapped a six-day winning streak, erasing a major part of its weekly gains, and remain at the mercy of the USD/oil price dynamics.

Technical levels to watch

German Chancellor Olaf Scholz is speaking at a press conference with Chinese Premier Li Keqiang on Friday, noting that “in these times, it's even more important than usual to talk and exchange with each other.”

Further comments

Market reaction

EURUSD is trading listlessly below 0.9800, adding 0.32% on the day, awaiting the US Nonfarm Payrolls (NFP) release. 

The US Dollar Index (DXY) is trading in negative territory near 112.50 after having registered gains for six straight days. However, today's US Nonfarm Payrolls (NFP) may come in above 200K, adding fuel to the USD rally, economists at ING report.

NFP can keep Fed away from pivot

“There's a growing perceived chance that the Fed will be the last major central bank to throw in the towel and arrest its tightening cycle, and we think this notion can provide quite sustainable support to the Dollar into the new year.” 

“The focus will shift back to data as US October payrolls are released. We see room for a slightly above-consensus headline read (220K vs a conservative 195K), which should overshadow the widely expected 0.1% increase in the unemployment rate and marginal slowdown in wage growth.”

“We expect today's release to leave markets still searching for a higher Fed terminal rate, ultimately keeping the Dollar bid.” 

“A decisive break above 113.00 in DXY appears on the cards: if not today, probably in the coming days.”

See – NFP Preview: Forecasts from 10 major banks, further significant job growth

FX option expiries for Nov 4 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

- EUR/USD: EUR amounts        

• 0.9650 260m
• 0.9750 615m
• 0.9790-00 1.62b
• 0.9825-35 902m
• 0.9870 254m
• 0.9900 1.28b
• 0.9925-30 348m
• 0.9950-55 487m
• 1.0000 2.48b

- GBP/USD: GBP amounts        

• 1.1200 304m

- USD/JPY: USD amounts                     

• 146.00 607m
• 147.00 1.05b
• 148.00 680m
• 149.00 583m
• 150.00 940m

- USD/CHF: USD amounts        

• 0.9900 250m
• 1.0000 203m

- AUD/USD: AUD amounts  

• 0.6325 289m
• 0.6500 289m

- USD/CAD: USD amounts       

• 1.3630 500m
• 1.3645-50
• 1.3695-00 795m
• 1.3720 272m

- NZD/USD: NZD amounts

• 0.5785 343m

The Bank of England (BoE) Chief Economist Huw Pill said on Friday, “we still think there is more to do on inflation pressures.”

Additional quotes

Market reaction

Pill’s comments have little to no impact on the Pound Sterling, as GBPUSD is keeping its range around 1.1215, adding 0.43% on the day.

Norges Bank announced a 25 bps hike on Thursday, sending the sight deposit rate to 2.50%. The market seemed disappointed and the Norwegian krone eased in its initial reaction. Economists at Commerzbank expect NOK to remain under pressure until inflation data next week.

Signs of economy cooling down

“Norges Bank expects that the rate of inflation will ease in the future. Moreover, there are signs that the economy is slowly cooling. Also, Norges Bank’s past rate hikes should increasingly be felt.”

“Whether things will work out as projected in the end will have to be seen. The uncertainty on that front remains high, as Norges Bank itself admits. For that reason, the market is likely to wonder whether Norges Bank has not reduced the speed of the rate hikes too early.”

“The market is likely to be keenly interested in the publication of the inflation data for October next week and in signs that inflation really might have peaked. Until then the market might remain sceptical though so that further recovery is likely to be difficult for NOK.”

• Silver gains strong traction for the second straight day and climbs beyond the mid-$19.00s.
• The neutral technical setup warrants some caution before positioning for any further gains.
• A sustained strength beyond the $20.00 mark is needed to confirm a fresh bullish breakout.

Silver builds on the previous day's solid recovery from the $18.85-$18.80 support zone and gains some follow-through traction for the second straight day on Friday. The white metal maintains its bid tone through the early European session and is currently trading around the $19.70-$19.80 region, up over 1.30% for the day.

Looking at the broader technical picture, the recent two-way price moves witnessed over the past two weeks or so constitute the formation of a rectangle on the daily. This points to indecision over the near-term trajectory for the XAGUSD. Furthermore, the metal's inability to find acceptance above the 100-day EMA and this week's failures near the $20.00 psychological mark warrants caution for bullish traders.

This makes it prudent to wait for a sustained break through the handle before positioning for any further near-term appreciating move. With oscillators on the daily chart moving in the positive territory, the XAGUSD might then accelerate the momentum towards an intermediate resistance near the $20.50 region. The momentum could get extended and allow the bulls to eventually aim back to reclaim the $21.00 mark.

On the flip side, the daily swing low, around the $19.40 region, now seems to protect the immediate downside ahead of the $19.00 round figure. Any subsequent slide might continue to find decent support near the $18.85-$18.80 horizontal zone, which if broken decisively will shift the bias in favour of bearish traders. The subsequent downfall has the potential to drag the XAGUSD to the $18.30-$18.25 support zone.

This is closely followed by the $18.00 round-figure mark, below which spot prices could slide further towards challenging the YTD low, around the $17.55 zone touched in September.

Silver daily chart

Key levels to watch

US midterm elections will be in the limelight next week, and the Democrats are likely to lose control of Congress. While political disagreements may capture the headlines, it is the Fed outlook that matters more for the markets, economists at Nordea report.

Still mostly about the Fed

“While the results of the midterms will be watched closely next week, the Fed outlook remains a much bigger and more permanent driver for financial markets compared to US politics.”

“We see more upside potential for US yields, but the risk picture is not tilted towards higher yields any more in the same way as it was some time ago. In a state of high data dependency on the part of central banks, an environment of elevated volatility is set to continue.”

Gold price is looking to recover further ground from two-month lows of $1,617. The focus now shifts towards the all-important United States (US) Nonfarm Payrolls data. The yellow metal could extend its bounce if figures miss expectations, FXStreet’s Dhwani Mehta reports.

All eyes on United States Nonfarm Payrolls data

“The US Federal Reserve (Fed) sees interest rates increasing until inflation is brought down, with the peak rate seen as higher than previously estimated. The Bank of England (BOE) hiked the policy rate by 75 bps but projected that Britain will sink into a deeper recession while adding that rates are likely to rise less than the market’s expectations. The policy announcements suggest that higher borrowing costs are likely to stay for longer, which could keep any upside attempts in the non-interest-bearing Gold price short-lived.”

“A bigger-than-expected decline in the payrolls is likely to hint at potential smaller rate increases by the Fed in the coming months, as the weak print would revive economic slowdown fears. In such a case, Gold price could extend its rebound. But the upside may likely remain limited, as investors would look out for next Thursday’s US Consumer Price Index (CPI) release for insights on the Fed’s next rate hike move.”

See – NFP Preview: Forecasts from 10 major banks, further significant job growth

EURUSD is currently trading below the 0.98 level. However, economists at Westpac expect the pair to stage a substantial recovery towards 1.07 by the end of next year.

Removal of downside risks related to European energy supply to lift EUR

“While it increasingly looks as though EuroArea activity growth will outpace that seen in the US through 2022 and 2023, this is not the primary factor behind our forecast. Instead it is the removal of downside risks related to European energy supply, with the Continent’s gas stores essentially filled ahead of winter and infrastructure necessary to allow the replenishing of reserves through 2023 now in place.”

“Our central expectation is for EURUSD to rise from below 0.98 currently to 1.07 and 1.14 at end-2023 and 2024 respectively.” 

“If the winter weather proves benign as the market is increasingly suspecting, upside risks for Euro may build in the new year.”

The Bank of England (BoE) still seems hesitant in the fight against inflation. Therefore, economists at Commerzbank expect the British Pound to edge lower over the coming months.

Acting hesitantly when it comes to fighting inflation

“The BoE hiked its key rate by an impressive 75 bps to 3%. But it put a dampener on expectations that it might proceed at this speed. According to the BoE key rates are likely to peak below market expectations.”

“It will yet have to be seen whether inflation will fall over the coming months as expected by the BoE. Even the bank itself admits that this is very uncertain. It even sees the risk for inflation on the upside. Against this background, the question arises whether it makes sense to dampen rate hike expectations already at this stage.”

“As it is difficult to imagine that the BoE’s stance will change Sterling is likely to trend weaker over the coming months.”

Canada’s employment data for October will be reported by Statistics Canada on Friday, November 4 at 12:30 GMT and as we get closer to the release time, here are forecasts from economists and researchers at five major banks regarding the upcoming jobs figures. 

The North American economy is estimated to have created 10K jobs in October as against a massive jobs growth of 21.1K reported in September. The Unemployment Rate, however, is seen higher at 5.3% last month from September’s 5.2% while the Participation Rate is likely to hold steady at 64.7% in the reported period.

TDS

“We look for employment to rise by 10K, fueled by the goods sector, which should see the UE rate edge higher to 5.3% as wage growth slips 0.1pp lower to 5.1% YoY.”

NBF

“Recent economic indicators point to a slowdown in growth in Canada, a phenomenon that could be reflected in employment data. Layoffs may well have remained low during the month, but we believe this could have been offset by a slowdown in hiring amid declining small business confidence. Our call is for a 5K increase. Despite this gain, the unemployment rate may increase from 5.2% to 5.4%, assuming the participation rate rose one tick to 64.8% and the working-age population grew at a strong pace.”

RBC Economics

“We expect a 5K increase in Canadian employment in October, as hiring momentum (especially on the goods-producing side of the economy) continues to soften amid a cooling housing market and weakening demand for consumer products. That, together with a small rebound in the labour force participation rate, should drive the jobless rate back to August levels of 5.4%.”

CIBC

“We expect to see only a very slim 5K increase in employment during October, which would be far enough below the pace of population growth to see the jobless rate tick up to 5.3%. Monthly movements in average wages have been softer in recent months, although the annual rate is expected to remain close to 5% in October before easing more meaningfully next spring. A further, modest, rise in the unemployment rate combined with additional evidence that wage inflation is close to peaking should convince the Bank of Canada to slow and eventually halt its current rate hiking cycle.”

Citibank

“Canada Net Change in Employment – Citi: 15K, prior: 21.1K; Unemployment Rate – Citi: 5.3%, prior: 5.2%; Hourly Wage Rate – Citi: 5.0%, prior: 5.2%. Monthly trends in job growth appear to have returned towards a more typical pre-pandemic pattern. An even more notable slowing in activity around mid-2023 should see more consistent monthly jobs losses and a rise in unemployment.”

In the view of economists at Commerzbank, it seems difficult for the US Dollar to enjoy further gains unless the October jobs report surprises significantly to the upside.

Now it depends even more on the data

“The Fed has made it clear that a reduction in the pace of interest rate hikes is possible, but only if the data allow it. Against this backdrop, today's labor market report is likely to be of greater interest.”

“We expect another very solid job creation of around 220K. However, after the USD was able to make significant gains in the last few days, it should gradually become difficult to post further gains. The labor market report would therefore probably have to be a very clear positive surprise to push the USD even higher.”

See – NFP Preview: Forecasts from 10 major banks, further significant job growth

• USDJPY struggles to gain any meaningful traction and remains confined in a range on Friday.
• A modest USD downtick acts as a headwind for the pair, though the downside remains limited.
• Traders now seem to have moved on the sidelines ahead of the closely-watched US NFP report.

The USDJPY pair extended its sideways consolidative price move for the second straight day on Friday and remains confined in a narrow band through the early European session. The pair is currently trading around the 148.00 round-figure mark as traders await the release of the closely-watched US monthly jobs data (NFP) for a fresh impetus.

In the meantime, a modest US Dollar pullback from a nearly two-week high touched on Thursday acts as a headwind for the USDJPY pair. Apart from this, speculations that Japanese authorities might intervene again to soften any steep fall in the domestic currency further contribute to capping the upside for spot prices, at least for the time being. That said, a big divergence in the monetary policy stance adopted by the Federal Reserve and the Bank of Japan (BoJ) might continue to lend support and limit any meaningful decline.

In fact, Fed Chair Jerome Powell smashed expectations for a dovish pivot and said on Wednesday that it was premature to discuss a pause in the rate-hiking cycle. Powell added that the terminal rate will still be higher than anticipated, which remains supportive of elevated US Treasury bond yields. In contrast, the BoJ, so far, has shown no inclination to hike interest rates and reiterated that it will continue to guide the 10-year bond yield at 0%. This, in turn, favours the USDJPY bulls and supports prospects for further gains.

Traders, however, seem reluctant to place aggressive bets ahead of the key US macro data. The popularly known NFP report, along with the US bond yields, will play a key role in influencing the USD price dynamics and produce short-term trading opportunities around the USDJPY pair. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside and any downtick is more likely to get bought into.

Technical levels to watch

Gold is printing the biggest daily gains in two weeks. However, the risks are still tilted to the downside as long as the yellow metal trades below the critical resistance zone at  $1,650, FXStreet’s Dhwani Mehta reports.

Gold price remains vulnerable as the daily RSI still stays below 50

“With the 14-day Relative Strength Index (RSI) lurking below the 50.00 level, risks to the downside remain intact unless the bright metal seeks a daily close above the critical resistance zone around $1,650. That area is the confluence of the bearish 21-Daily Moving Average (DMA) and the falling trendline (triangle) resistance.”

“Acceptance above $1,650 will validate a triangle breakout, initiating a fresh uptrend towards the $1,700 mark. Bulls still need to battle the descending 50DMA at $1,674 and the October 13 high of  $1,683 on the renewed upside.”

“Failure to recapture the critical resistance around $1,650 would revive the downtrend, with a retest of the two-month lows inevitable. The next significant downside target will align at the $1,600 threshold.”

• NZDUSD regains positive traction on Friday and draws support from a combination of factors.
• A modest USD downtick and a positive risk tone offer some support to the risk-sensitive Kiwi.
• The Fed’s hawkish outlook should help limit the USD losses and cap the pair ahead of the NFP.

The NZDUSD pair attracts fresh buying near the 0.5755 region on Friday and reverses the previous day's slide to over a one-week low. The pair maintains its bid tone through the early European session and is currently placed near the daily high, just above the 0.5700 round-figure mark.

The US Dollar pauses the post-FOMC rally and for now, seems to have snapped a six-day winning streak, which, in turn, offers support to the NZDUSD pair. A generally positive tone around the equity markets is seen weighing on the safe-haven buck and benefiting the risk-sensitive Kiwi. Apart from this, the USD downtick could be attributed to some repositioning trade ahead of the closely-watched US monthly jobs report, due for release later during the early North American session.

That said, elevated US Treasury bond yields, bolstered by a more hawkish stance adopted by the Federal Reserve, should limit any deeper USD pullback and cap gains for the NZDUSD pair. It is worth recalling that Fed Chair Jerome Powell downplayed expectations for a dovish pivot and said that it was premature to discuss a pause in the rate-hiking cycle. Powell added that the terminal rate will still be higher than anticipated and triggered a sharp rise in the US Treasury bond yields.

In fact, the yield on the two-year US government bond, which is highly sensitive to interest rate hike expectations, touched a 15-year high on Thursday and inched closer to the 5% psychological mark. The benchmark 10-year US Treasury note, meanwhile, holds steady above the 4.0% threshold and favours the USD bulls. Heading into the key data risk, the fundamental backdrop might hold back traders from placing aggressive bets and cap the upside for the NZDUSD pair, for the time being.

Technical levels to watch

• German Factory Orders plunged 4.0% MoM in September vs. -0.5% expected.
• German Factory output slumped 10.8% YoY in September vs. -8.8% expected.
• EUR/USD keeps its range near 0.9780 despite awful German data.

The German Factory Orders missed expectations for the third straight month in September, suggesting that the manufacturing sector activity is deep in murky waters.

Contracts for goods ‘Made in Germany’ tumbled 4.0% on the month vs. -0.5% expected and -2.0% last, the latest data published by the Federal Statistics Office showed on Friday.

On an annualized basis, Germany’s Industrial Orders arrived at -10.8% in the reported month vs. -8.8% expected and -3.8% previous.

FX implications

The shared currency remains unfazed by the disappointing German factory data.  At the time of writing, EUR/USD is adding 0.32% on the day, trading at 0.9780.

The US Bureau of Labor Statistics (BLS) will release the October jobs report on Friday, November 4 at 12:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of 10 major banks regarding the upcoming employment data.

Expectations are for a 200K rise in Nonfarm Payrolls following the 263K increase in September while the US Unemployment Rate may increase to 3.6% from 3.5% prior.

Commerzbank

“We expect job creation of 220K. The unemployment rate is likely to rise slightly to 3.6% after the unexpectedly sharp decline in September.”

SocGen

“For October, we expect NFP to rise by 300K, faster than the 263K reported in September. Payrolls grew an average of 562K per month in 2021 and in the first half of 2022 they grew at a 444K pace. The unemployment rate is expected to hold steady at 3.5%, but we view a further decline to 3.4% as highly likely very soon. With employment gains above a 150-175K range per month, there is pressure for the unemployment rate to drop. We estimate the 150-175K pace as representing growth in the working-age population.”

Deutsche Bank

“The headline consensus is at +190K (DB at +225K vs. +263K previously) with private at +195K (DB at +225K vs. +288K previously). We expect the unemployment rate to stay at 3.5% but the consensus expects it to tick up to 3.6%. Average hourly earnings are expected by the street to dip from 5% to 4.7% (DB at 4.6%).”

Danske Bank

“We expect to see relatively strong jobs report with another 220K employed.”

NBF

“Hiring could have slowed down in the month if previously released soft indicators such as S&P Global’s Composite PMI are any guide. Layoffs, meanwhile, could have stayed very low judging by the level of initial jobless claims. With these two trends cancelling each other, payroll growth could come in at 175K. The household survey is expected to show a similar gain, a development which could leave the unemployment rate unchanged at 3.5%, assuming the participation rate stayed put at 62.3%.”

RBC Economics

“We expect employment growth will likely lose more momentum October. We expect a 150K increase in jobs alongside a tick higher in the unemployment rate, but to a still low 3.7%.”

CIBC

“The jump in initial jobless claims early in October included the impact of Hurricane Ian, and claims remained elevated into the payrolls survey reference week, suggesting that hiring could have cooled to a 175K pace. That’s also consistent with the deterioration seen in the Conference Board’s labor differential, the softening in job openings in recent months, and caution amongst businesses as the demand outlook has dimmed. Moreover, with the prime-age participation rate hovering around its pre-pandemic level, there is little room for continued, outsized job gains. That would likely leave the unemployment rate a tick higher at 3.6%. We’re slightly below the consensus, which could nudge bond yields and the USD lower.”

Citibank

“US October Nonfarm Payrolls – Citi: 190K, prior: 263K; Private Payrolls – Citi: 170K, prior: 288K; Average Hourly Earnings MoM – Citi: 0.4%, prior: 0.3%; Average Hourly Earnings YoY – Citi: 4.7%, prior: 5.0%; Unemployment Rate – Citi: 3.5%, prior: 3.5%. Employment growth in recent months is slowing back towards pre-pandemic pace (100-300K per month). We expect further slowing into next year with monthly job losses as demand cools further.”

Wells Fargo

“While overall growth prospects have weakened considerably, we expect employers to continue to hire at a solid pace in the near term and forecast payrolls to increase by 190K in October. We anticipate the unemployment rate will hold steady at 3.5% in October and look for average hourly earnings to rise 0.3% over the month.”

TDS

“We look for slowing job growth in the October labor market report from 263K in September to 220K. The unemployment rate likely rose from 3.5% previously to 3.7%.”

• US Dollar Index retreats from a six-week-old resistance line to tease bears.
• 21-DMA, weekly support line restricts short-term downside amid looming bull cross on MACD.
• Bulls have a bumpy road to travel before reaching the yearly top.

US Dollar Index (DXY) trims the biggest weekly gains in six while holding lower grounds near 112.55, down 0.40% intraday, as traders brace for the US jobs report on Friday.

In doing so, the greenback’s gauge versus the six major currencies takes a U-turn from a downward-sloping resistance line from September 26.

However, the DXY remains on the bull’s radar as it stays beyond the 21-DMA and a one-week-old support line. Also keeping the buyers hopeful are the impending bullish signals on the MACD.

It should be noted, though, that the quote’s recovery moves have multiple hurdles to the north even if the US Dollar Index manages to cross the 113.00 immediate resistance line stated above.

That said, the two-month-old previous support line and a five-week-long descending trend line, respectively around 113.10 and 113.40, could act as extra upside filters before directing the quote towards the yearly top of 114.78.

Meanwhile, pullback moves may initially aim for the 21-DMA support of 112.12 before testing the aforementioned weekly support line near 111.85.

It’s worth observing that the DXY’s weakness past 111.85 could push the bears towards an early September swing high near 110.80 before highlighting the 50% Fibonacci retracement level of August-September upside, close to 109.65.

Overall, the US Dollar Index remains on the bull’s radar despite the latest pullback.

Also read: US Dollar Index seesaws near three-week high around 113.00 amid pre-NFP anxiety

DXY: Daily chart

Trend: Bullish

Here is what you need to know on Friday, November 4:

The US Dollar (USD) is struggling to preserve its strength on the last trading day of the week with the US Dollar Index trading in negative territory near 112.50 after having registered gains for six straight days. The improving market mood seems to be making it difficult for the USD to outperform its rivals as investors wait for the US Bureau of Labor Statistics to release the October jobs report later in the session. Eurostat will publish the September Producer Price Index (PPI) for the Eurozone and European Central (ECB) Bank President Christine Lagarde is scheduled to deliver a speech. Finally, Canadian labour market data will also be featured in the North American economic docket.

Canadian October Jobs Preview: Labor market upturn in the doldrums.

Reflecting the risk-positive market atmosphere, Shanghai Composite remains on track to end the day with a gain of over 2% and US stock index futures rise between 0.3% and 0.55%. Meanwhile, the benchmark 10-year US Treasury bond yield fluctuates in a relatively tight channel above 4%.

On Thursday, the Bank of England (BoE) announced that it raised its policy rate by 75 basis points to 3% as expected. In the policy statement, however, the BoE said further increases in bank rate may be required but noted that the peak rate would be lower than 5.2% priced into markets. During the press conference, BoE Governor Andrew Bailey said that they may have the largest upside risk in inflation forecasts in the MPC history but the British Pound failed to stay resilient against its major rivals. GBPUSD lost more than 200 pips on Thursday and touched its lowest level in two weeks at 1.1150 before staging a rebound. At the time of press, the pair was up 0.5% on the day above 1.1200.

BOE Quick Analysis: Bailey hits the pound when it's down, recession gloom means further falls.

EURUSD fell sharply following the Federal Reserve's policy announcements late Wednesday but found support near 0.9730. The pair trades in positive territory early Friday and continues to edge higher toward 0.9800. ECB President Lagarde reiterated on Thursday that inflation is still way too high and that they have to take action. Lagarde further added that the Euro's exchange rate matters and that it has to be taken into account in inflation projections.

USDJPY failed to make a decisive move in either direction on Thursday and closed the day virtually unchanged at around 148.00. The pair extends its sideways grind early Friday. During the Asian trading hours, Japanese Finance Minister Shunichi Suzuki said that they have “no intention of guiding fx to certain levels by intervening.”

Gold benefited from US T-bond yields' uninspiring performance despite the hawkish Fed tone and climbed toward $1,650 early Friday. 

US October Nonfarm Payrolls Preview: Analyzing gold's reaction to NFP surprises.

Following Thursday's choppy action, Bitcoin regained its traction and was last seen rising nearly 2% on the day at $20,600. Similarly, Ethereum is up more than 3% on the day at $1,580.

• Gold price remains on the front foot, printing the biggest daily gains in two weeks.
• Pre-NFP consolidation joins risk-positive headlines surrounding China to please XAUUSD bulls.
• Bulls approach the key resistance but remain unsure of crossing it amid hawkish Fed bets.

Gold price stays bid while posting the biggest daily gain, so far, in a fortnight amid the market’s cautious optimism ahead of the key US jobs report. With Friday’s strong gains, the bullion price reversed from red to green every week.

That said, the XAUUSD bulls are hopeful amid the downbeat US inflation expectations and mixed US data that weigh on the greenback. Furthermore, expectations of easing covid-led activity restrictions in China and the news suggesting early closing of the US audit inspections in China also favored the risk-on mood of late.

However, the US Treasury yields remain strong and the hawkish rhetoric from the global central banks, not only from the Fed, keeps the gold bears hopeful ahead of the all-important Nonfarm Payrolls (NFP).

Also read: Gold Price Forecast: XAUUSD appears a ‘sell the bounce trade', with US NFP ahead

Gold Price: Key levels to watch

The Technical Confluence Detector shows that the gold price floats beyond small supports while approaching the key resistance surrounding $1,662 that includes Fibonacci 61.8% one-month and 200-SMA in four-hour. Also adding strength to the level is the Fibonacci 38.2% in one-month.

That said, the middle band of the Bollinger on one-day, around $1,654, seems to guard the quote’s immediate upside.

It should also be noted that the bullion’s run-up beyond $1,662 opens the door for the $1,700 threshold.

Meanwhile, sellers may wait for a clear downside break of $1,638 to retake control, comprising 50-HMA, 5-DMA and the previous weekly low.

Following that, a smooth flow toward the recent low near $1,616 can’t be ruled out.

Here is how it looks on the tool

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

• AUDUSD has jumped above 0.6350 as the risk-on impulse has regained its mojo.
• Aussie bulls are soaring despite weaker Retail Sales and GDP projections for CY2023.
• Goldman Sachs sees US NFP for October month at 225k vs. the prior release of 263k.

The AUDUSD pair has witnessed a perpendicular rally after overstepping the critical hurdle of 0.6300 in the Asian session. The commodity-linked currency has been underpinned as the market mood has soared vigorously. S&P500 futures have rebounded after two consecutive bearish settlements.

The returns on 10-year US government bonds have slipped to 4.14%. Also, the US dollar index (DXY) has refreshed its day’s low below 112.50 and is expected to discover more losses as investors have shrugged off uncertainty ahead of the US Nonfarm Payrolls (NFP) data.

The Aussie bulls have picked significant bids despite a sheer decline in Retail Sales data and weak economic projections provided in the monetary policy statement by the Reserve Bank of Australia (RBA).

The Australian Bureau of Statistics has reported the Retail Sales for the third quarter at 0.2%, lower than the expectations of 0.45 and the prior release of 1.4%. A significant decline in retail demand despite soaring price pressures signals that consumer demand has remained extremely weak.

The minutes from RBA’s monetary policy statement dictate that short-term inflation expectations have increased to 8.0% amid price growth in the service sector. Also, the Gross Domestic Product (GDP) projections for the first half of CY2023 are landed at 2.0% and 1.4% for the second half.

Going forward, the US NFP event will be the major trigger that will dictate the further direction of the asset.  Analysts at Goldman Sachs see job additions in October month at 225k vs. the prior release of 263k. The jobless rate is seen unchanged at 3.5%.

• WTI picks up bids to refresh intraday high, braces for the second weekly gain.
• DXY pares the biggest weekly gain in seven ahead of US NFP.
• China-inspired optimism in Asia, mildly bid US stock futures add strength to the Crude Oil’s run-up.
• Strong US jobs report could probe energy bulls.

WTI takes the bids to refresh intraday high near $89.30 heading into Friday’s European session. In doing so, the black gold cheers the broad US dollar pullback amid cautious optimism in the Asia-Pacific region.

The US Dollar Index (DXY) retreats from a fortnight high to pare the biggest weekly gain in seven, refreshing intraday low around 112.55 by the press time.

The greenback’s latest losses could be linked to the hopes of witnessing positive news surrounding the Russia-Ukraine tussles as leaders from Germany and China meet. Also, the People’s Bank of China’s (PBOC) efforts to defend the Chinese Yuan (CNY) join the pre-data consolidation to add strength to the risk-on mood.

Additionally, news from Bloomberg that the US audit inspections in China finished early joined chatters surrounding relaxation in China’s covid rules also seemed to have favored the recent risk-on mood and the WTI Crude Oil prices.

Amid these plays, the US Treasury yields grind higher while the S&P 500 Futures print mild gains to print cautious optimism in the market. Also, the Asia-Pacific equities remain firmer, led by Hang Seng's 5.75% run-up. It should be noted that the MSCI's Index of Asia-Pacific shares outside Japan rises more than 1.0% whereas Japan's Nikkei drops 1.85% on a day at the latest.

It should be noted that Europe’s oil embargo and the US readiness for more release from the Strategic Petroleum Reserve (SPR) challenge the WTI Crude Oil traders.

Elsewhere, Reuters said, “Underscoring demand concerns, Saudi Arabia lowered December official selling prices (OSPs) for its flagship Arab Light crude to Asia by 40 cents to a premium of $5.45 a barrel versus the Oman/Dubai average.” The news also added that the cut was in line with trade sources' forecasts, which were based on a weaker outlook for Chinese demand.

Moving on, the US jobs report and geopolitical headlines surrounding Russia will be closely watched for fresh impulse.

Also read: Oil market developments: Saudis to lower prices for Asia, US Biden expected to release more SPR

Technical analysis

A downward sloping resistance line from August 30, near $89.55, restricts the WTI Crude Oil’s short-term upside ahead of the 100-DMA hurdle surrounding $91.25. However, the buyers remain hopeful unless the quote stays beyond the 21-DMA and a five-week-long support line, respectively near $86.80 and $85.60.

• Risk-perceived assets have regained their mojo as market mood has turned cheerful.
• Oversold momentum indicators in a higher lows structure offer smart money channelization opportunity.
• The RSI (14) has rebounded after dropping below 30.00.

The EURUSD pair has delivered a firmer reversal after sensing a decent buying interest of around 0.9743 in the Tokyo session. The asset has extended its rebound move and is aiming to recapture the immediate hurdle of 0.9800 as the risk-on impulse has regained traction.

The mighty US dollar index (DXY) has refreshed its day’s low below 112.50 as anxiety ahead of the US Nonfarm Payrolls (NFP) has aired. Meanwhile, the 10-year US Treasury yields have slipped to near 4.14%.

On a four-hour scale, the major has rebounded after testing the upward-sloping trendline placed from September low at 0.9536. However, the asset is being offered below the 20-and 200-period Exponential Moving Averages (EMAs), which indicates that the trend is still bearish. Moving Averages are lagging indicators, therefore cannot tag a reversal as a buying opportunity.

While the Relative Strength Index (RSI) (14) rebounded after dropping to near 27.65 as the momentum oscillators triggered oversold signals.

The conjunction of higher-low structure and oversold momentum oscillators are hinting that smart money will be poured into the Euro.

Going forward, a break above the immediate hurdle of 0.9800 will send the asset towards October 23 high at 0.9900, followed by the parity.

On the flip side, the Euro could lose strength if it drops below October 21 low at 0.9705. This will drag the asset towards October 13 low and September low at 0.9632 and 0.9536 respectively.

EURUSD four-hour chart

• EURGBP pares the biggest daily gain in six weeks.
• Sustained break of descending triangle, firmer oscillators favor buyers.
• Bears need validation from 0.8660, October’s high adds to the upside filters.

EURGBP takes offers to refresh the intraday low near 0.8708 heading into Friday’s European session. In doing so, the cross-currency pair consolidates the biggest daily gains since late September, marked the previous day.

Technically, the quote’s recent weakness could be portrayed by a pullback from the 200-SMA. However, a successful break of the three-week-old bearish triangle, crossed on Thursday, keeps the pair buyers hopeful unless the quote drops back below 0.8660.

Also favoring the EURGBP sellers could be the bullish MACD signals and the strong RSI (14), not overbought.

Even if the quote breaks 0.8660 resistance-turned-support, the downside could have a limited shelf life lower line of the stated triangle, around 0.8570, which could challenge the pair bears.

It should be noted that September’s low near 0.8566 acts as the last defense of the EURGBP buyers.

Alternatively, recovery moves need to cross the 200-SMA hurdle of 0.8740 to recall the EURGBP bulls.

Even so, the previous monthly top near 0.8865 appears a tough nut to crack for buyers.

Following that, a run-up towards the 0.9000 psychological magnet can’t be ruled out.

EURGBP: Four-hour chart

Trend: Further weakness expected

• GBP/USD has extended Tokyo’s recovery above 1.1200 as the risk-off impulse has rebounded.
• Long-term US government bonds have surrendered the majority of their gains.
• Going forward, the US NFP data will be of utmost importance.

The GBP/USD pair has added more gains after overstepping the round-level resistance of 1.1200 in the Tokyo session. The Cable rebounded from 1.1150 after sensing a loss in the downside momentum. The risk impulse is turning positive as investors are shrugging off uncertainty ahead of the US Nonfarm Payrolls (NFP) data.

Meanwhile, the US dollar index (DXY) has slipped below 112.60 after struggling to cross the crucial hurdle of 113.00. The S&P500 futures have displayed a minor recovery after remaining sideways. While the 10-year US Treasury yields have surrendered the majority of their gains and have dragged to 4.14%.

On Thursday, the Pound bulls witnessed a steep fall after the Bank of England (BOE) announced a rate hike by 75 basis points (bps). The decision remained in line with the estimates but commentary from BOE Governor Andrew Bailey on UK’s recession situation weakened the Sterling. BOE Governor confirmed that the UK economy is in recession and the situation will last potentially two years more than observed in the period of the subprime crisis.

The recession situation indicates a negative growth rate in economic activities, which will compel the BOE not to go too heavy on interest rates further. This could lead to the widening of the Federal Reserve (Fed)-BOE policy divergence ahead.

On the US front, the release of US employment will support the market participants to make informed decisions ahead. As per the consensus, the US economy has added 200k jobs in the labor market vs. the prior release of 263k. Also, the Unemployment Rate is seen higher at 3.6%.

• USDCAD takes offers to refresh intraday low, snapping six-day uptrend.
• Cautious optimism in the market joins firmer oil prices, US dollar pullback to tease pair sellers.
• Fed versus BOC play can keep bulls hopeful even if the US jobs report fail to impress DXY buyers.

USDCAD cheers the broad US dollar pullback, as well as a mildly positive market mood, as it prints the first intraday loss in seven. That said, the Loonie pair takes offers to refresh the daily low near 1.3680 during early Friday morning in Europe.

That said, the US Dollar Index (DXY) retreats from a fortnight high to pare the biggest weekly gain in seven, refreshing intraday low around 112.60 by the press time.

The greenback’s latest losses could be linked to the hopes of witnessing positive news surrounding the Russia-Ukraine tussles as leaders from Germany and China meet. Also, the People’s Bank of China’s (PBOC) efforts to defend the Chinese Yuan (CNY) join the pre-data consolidation to add strength to the risk-on mood.

It should be noted that the firmer prices of the Crude Oil, Canada’s main export item, also weigh on the USDCAD of late. WTI crude oil rises 1.25% intraday to $88.45 at the latest.

Alternatively, the hawkish plays of the US Federal Reserve (Fed) contrast with the Bank of Canada’s (BOC) easy rate hike to favor buyers. Also, strong yields and fears of an economic slowdown are extra catalysts keeping the USDCAD bulls hopeful.

Amid these plays, the US stock futures print mild gains and the yields remain firmer whereas the Asia-Pacific equities print notable gains led by China.

Moving on, the employment data from the US and Canada will be crucial for the USDCAD pair traders to watch and might help the recent sellers to keep the reins amid downbeat market consensus for the US numbers. Forecasts suggest that the headline US NFP could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior. On the other hand, Canada’s Net Change in Employment may also ease to 10K versus 21.1K prior with the Unemployment Rate likely witnessing an uptick to 5.3% from 5.2% prior.

Even so, the Fed versus the BOC game is in the favor of the USDCAD bulls and hence any pullback could be considered non-lucrative for sellers.

Technical analysis

USDCAD retreats from a six-week-old horizontal resistance, around 1.3825-10, but the downside remains elusive unless the quote stays beyond a convergence of the 50-DMA and lows marked since late October, close to 1.3500.

“We meet in time of big tension, russian war on ukraine brings problems for rule-based world order, good to meet directly,” said German Chancellor Olaf Scholz as he meets Chinese President Xi Jinping on Friday.

More to come

• USDINR sellers poke one-week-old support line amid sluggish markets.
• PBOC moves, pre-NFP consolidation allowed Asian markets to remain mildly bid.
• US dollar needs strong jobs report to defend the biggest weekly gains in seven.

USDINR remains depressed around 82.65, down for the second consecutive day, as traders await the all-important US jobs report during early Friday.

In doing so, the Indian Rupee (INR) pair also benefits from the US dollar’s retreat ahead of the key Nonfarm Payrolls (NFP). Further, the People’s Bank of China’s (PBOC) efforts to defend the Chinese Yuan (CNY) join the broad optimism in Asia to also favor the USD/INR pair sellers of late.

However, firmer Treasury yields and hawkish Fed bets keep the pair buyers hopeful. On the same line could be the recently firmer Oil price, which in turn has inverse relations with the INR due to India’s reliance on energy imports and a record deficit. Furthermore, covid woes in China and fears of recession elsewhere, as well as the hawkish Fed, tease the USDINR bears.

On Thursday, the USDINR pair initially rose to the highest levels in three weeks before retreating from 83.18. The pullback moves could be linked to the market’s optimism after the Reserve Bank of India’s (RBI) inflation talks. “The Reserve Bank of India's monetary policy committee met on Thursday to discuss the bank's report to the government for having failed to meet its inflation targets for three straight quarters for the first time since it was set up in 2016,” said Reuters. The news also mentioned that India's central bank will not immediately release details of the report to the government, Governor Shaktikanta Das said.

Elsewhere, US ISM Services PMI for October dropped to 54.4 from 56.7 prior and 55.5 market consensus. However, the Factory Orders matched 0.3% forecast versus 0.2% upwardly revised previous readings. It should be noted that the US S&P Global Composite PMI and Services PMI got an upward revision from their preliminary readings for the stated month whereas the Initial Jobless Claims eased to 217K for the week ended on October 28 versus 220K expected and 218K prior. On the other hand, US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, dropped to the lowest levels since October 19 and 13 in that order.

Amid these plays, the Wall Street benchmarks closed in the red while the US 10-year Treasury yields refreshed a one-week high to 4.22% before retreating to 4.15%. Notably, the US 2-year bond coupons rose to the highest levels since 2007. It should be noted that the S&P 500 Futures remain indecisive while the yields are sidelined at the latest, which in turn portrays the sluggish markets and allow USDINR to remain weak.

Moving on, the US jobs report for October will be crucial for near-term directions. Forecasts suggest that the headline US Nonfarm Payrolls (NFP) could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior.

Technical analysis

Bearish MACD signals join the RSI (14) retreat to favor the USDINR sellers in breaking the 82.60 support, comprising an ascending trend line from October 27. However, the late October swing low near 81.90 appears a tough nut to crack for the pair sellers. That said, recovery needs a daily closing beyond 83.00 to convince buyers.

China’s President Xi Jingping said in a statement on Friday, “as big nations with influence, China and Germany should work together all the more in times of change and turmoil to make a greater contribution to world peace and development.”

Earlier on, China’s state media reported that the country’s President Xi will meet with German Chancellor Olaf Scholz on Friday at the Great Hall of the People in Beijing.

• EURUSD portrays pre-NFP consolidation under 0.9800, ECB’s Lagarde eyed too

• Gold price has refreshed the day’s high at $1,640.00 as DXY has declined after failing to cross 113.00.
• Mixed signals from associated asset classes indicate anxiety among investors ahead of the US NFP data.
• A decline in labor cost data could impact households’ sentiment.

Gold price (XAUUSD) has extended its recovery after overstepping the intraday hurdle of $1,632.22. The precious metal has climbed to $1,640.00 and is not showing any sign of exhaustion yet. S&P500 futures are bound in a marginal territory, however, the US dollar index (DXY) has witnessed minor correction after failing to cross the critical hurdle of 113.00 but is still holding the day’s low.

Mixed responses are coming from different asset classes, which could be signs of anxiety ahead of the release of the US Nonfarm Payrolls (NFP) data. According to the preliminary estimates, the US economy created additional 200k jobs in October against 263k recorded in September month.

Apart from that, the catalyst that is making investors anxious about the employment report is the Average Hourly Earnings data. The labor cost data is seen lower at 4.7% vs. the prior release of 5.0%. A decline in earnings could dent households’ sentiment as higher payouts won’t get offset by subdued earnings. This could lead to a further decline in consumer spending.

Gold technical analysis

On an hourly scale, the gold prices have formed a Double Bottom chart pattern that signals a bullish reversal. The asset has recovered vigorously after testing October 21 low at $1,617.35.

The precious metal has comfortably crossed the 20-and 50-period Exponential Moving Averages (EMAs) at $1,632.71 and $1,636.06 respectively, which adds to the upside filters.

Meanwhile, the Relative Strength Index (RSI) (14) is attempting a break into the bullish range of 60.00-80.00, which will strengthen the Gold bulls further.

Gold hourly chart

Analysts at Goldman Sachs offer their expectations on Friday’s critical United States (US) Nonfarm Payrolls (NFP) release due for release at 12:30 GMT.

Key quotes

“Nonfarm payrolls rose by 225k in October.”

“Unemployment rate unchanged at 3.5%.”

“Average hourly earnings +0.35% MoM & +4.7% YoY.”

“Labor demand remains elevated despite declining this year.”

“Big data indicators generally point to above-consensus payroll gains.”

• USDJPY is oscillating above 148.00 as investors are awaiting the US NFP release for making informed decisions.
• Rising interest rates and weaker economic projections have impacted employment opportunities.
• An intervention in FX by the BOJ is expected as USDJPY has rebounded in the past few trading sessions.

The USD/JPY pair is displaying a topsy-turvy performance above the critical support of 148.00 in the Tokyo session as investors have shifted their focus towards the release of the US employment data. The risk impulse is still favoring safe-haven assets as anxiety ahead of the US Nonfarm Payrolls (NFP) data is accelerating.

S&P500 futures have hardly moved in the Tokyo session as investors have shifted to the sidelines. The US dollar index (DXY) is continuously struggling to surpass the immediate hurdle of 113.00. Meanwhile, the 10-year US Treasury yields have escalated to 4.16% as a hangover of hawkish guidance on the interest rates by the Federal Reserve (Fed) is far from over.

Investors are in the mix on whether the Fed will pause its policy tightening measures after reaching the terminal rate proposed at 4.75% or will continue tweaking monetary policy as short-term inflationary expectations are still de-anchored.

For December monetary policy decision, Friday’s NFP data will be very crucial. Continuous increments in interest rates are responsible for the postponement of expansion plans from corporate, which has trimmed the requirement for more candidates. Also, weaker economic projections have resulted in a halt in the recruitment process by various firms. It is also noticed that job additions are increasing but at a significantly diminishing rate from the past three months and October, month report is no new under the sun.

As per the consensus, the US economy has added 200k jobs in the labor market vs. the prior release of 263k. Also, the Unemployment Rate is seen higher at 3.6%.

On the Tokyo front, , investors are worried over Japan-North Korea renewed tensions after North Korea fired an unidentified ballistic missile over Japan, as broadcasted by NHK. For safety measures, Japan administration warned residents to take shelter from missile threats.

Apart from that, a firmer rebound in the USDJPY pair has triggered expectations for repeat intervention by the Bank of Japan (BOJ) to support the Japanese yen against sheer volatility.

• AUDUSD picks up bids to extend the corrective pullback from a fortnight low.
• RSI, MACD conditions fail to support the recovery moves as buyers approach 10-DMA.
• Yearly bottom, 61.8% FE could lure bears on breaking 0.6275 support.

AUDUSD pares the biggest weekly loss in three as it rebounds from a short-term key support line during early Friday. That said, the Aussie pair renews its intraday high near 0.6320 while snapping the two-day downtrend by the press time.

It should, however, be noted that the receding bullish bias of the MACD signals and the sluggish RSI (14) appear weak in justifying the quote’s latest rebound. Also challenging the AUDUSD bulls is the 10-DMA hurdle surrounding 0.6385.

Should the quote rises past 0.6385, the odds of its run-up towards the 38.2% Fibonacci retracement level of September-October downside, near 0.6455, followed by the late October swing high near 0.6522, can’t be ruled out.

Even so, the AUDUSD bulls need a successful run-up beyond the 0.6550 level comprising the 50% Fibonacci retracement and the previous monthly peak to retake control.

Meanwhile, a downside break of the 0.6275 support could quickly drag AUDUSD prices toward the yearly low near 0.6170.

Following that, the 61.8% Fibonacci Expansion (FE) of the pair’s moves between September 13 and October 27, around 0.6060, will be in focus.

AUDUSD: Daily chart

Trend: Limited recovery expected

• USDCNH remains pressured around intraday low, down for the second consecutive day.
• PBOC prints the biggest weekly cash withdrawal in nine months.
• Increase in China’s covid counts, firmer DXY fail to chain bears amid pre-NFP consolidation.

USDCNH takes offers to refresh the intraday low near 7.3130 amid the chatters over the People’s Bank of China’s (PBOC) market meddling on early Friday. In doing so, the offshore Chinese Yuan (CNH) pair cheers the US dollar’s pullback amid the cautious mood ahead of the key US jobs report.

As per the latest calculation from Reuters, a net 737 billion Yuan for the week via open market operations, the biggest weekly cash withdrawal in nearly nine months.

It should be noted, however, that the recently escalating covid woes and the US Federal Reserve’s (Fed) hawkish bias keeps the USDCNH bears off the table. That said, China reported 4,045 new COVID-19 infections on November 3, versus 3,372 new cases reported a day earlier, per the latest data from Reuters.

On the other hand, mixed US data and US inflation expectations could also be linked to the USDCNH pair’s latest weakness. Talking about the data, US ISM Services PMI for October dropped to 54.4 from 56.7 prior and 55.5 market consensus. However, the Factory Orders matched 0.3% forecast versus 0.2% upwardly revised previous readings. It should be noted that the US S&P Global Composite PMI and Services PMI got an upward revision from their preliminary readings for the stated month whereas the Initial Jobless Claims eased to 217K for the week ended on October 28 versus 220K expected and 218K prior. On the other hand, US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, dropped to the lowest levels since October 19 and 13 in that order.

However, fears of higher rates and economic slowdown, as conveyed by policymakers from the Bank of England (BOE), the US Federal Reserve (Fed) and the European Central Bank (ECB), seemed to keep the US dollar on the front foot. That said, the US Dollar Index (DXY) retreats to 112.78 from a three-week high by the press time.

Having witnessed a lackluster session ahead of the US employment report for October, USDCNH traders may closely watch the US jobs report, especially the headline Nonfarm Payrolls (NFP) for clear directions. Forecasts suggest that the headline US NFP could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior. That said, the downbeat forecasts for the scheduled statistics signal a corrective move from the key support line in case of a surprise.

Also read: US October Nonfarm Payrolls Preview: Analyzing gold's reaction to NFP surprises

Technical analysis

USDCNH pullback remains elusive unless breaking the monthly support line, around 7.2230 by the press time. That said, the pair’s recovery need s validation from an eight-day-old descending resistance line, around 7.3470.

• EURUSD picks up bids to bounce off the lowest level in three weeks.
• Light macros, mixed sentiment also contribute to the typical pre-NFP trading lull.
• Firmer yields, hawkish Fed keeps EURUSD buyers hopeful but ECB’s Lagarde may help trigger intermediate rebound.
• US October jobs report could add strength to the corrective bounce on matching downbeat forecasts.

EURUSD licks its wounds around a three-week low as it approaches the intraday high near 0.9770. The major currency pair’s latest rebound could be considered preparations for the key data/events as traders await the US employment report for October and comments from European Central Bank (ECB) President Christine Lagarde on Friday.

The quote refreshed a multi-day low while declining for the fourth consecutive day on Thursday as the US dollar cheered a broad rush to risk safety amid fears of higher rates and economic slowdown, as conveyed by policymakers from the Bank of England (BOE), the US Federal Reserve (Fed) and the European Central Bank (ECB). Also contributing to the greenback’s strength were the fears emanating from China, North Korea and Russia, as well as the strong yields.

It should be noted that the hawkish comments from the ECB policymakers and mixed US data failed to tame the bearish bias the previous day.

On Thursday, European Central Bank (ECB) President Christine Lagarde said, “A recession won't be sufficient to settle inflation.” The policymaker also stated that they have to be attentive to spill-overs from the Fed policy. Further, ECB executive board member Fabio Panetta said, “If these bigger-than-expected increases are interpreted as signaling a higher terminal rate, we could have a stronger impact on financing conditions.” On the same line, ECB policymaker and Germany’s central bank head Joachim Nagel said on Thursday, the central bank “should not refrain from further hike rates, we have to bring inflation down in the mid-term.” In the end, ECB policymaker Mario Centeno said on Thursday, the central bank has “already made a large part of the necessary rate hikes to contain inflation in the Eurozone.”

Elsewhere, US ISM Services PMI for October dropped to 54.4 from 56.7 prior and 55.5 market consensus. However, the Factory Orders matched 0.3% forecast versus 0.2% upwardly revised previous readings. It should be noted that the US S&P Global Composite PMI and Services PMI got an upward revision from their preliminary readings for the stated month whereas the Initial Jobless Claims eased to 217K for the week ended on October 28 versus 220K expected and 218K prior.

Against this backdrop, the Wall Street benchmarks closed in the red while the US 10-year Treasury yields refreshed a one-week high to 4.22% before retreating to 4.15%. Notably, the US 2-year bond coupons rose to the highest levels since 2007. It should be noted that the S&P 500 Futures print mild losses while the yields are sidelined at the latest, which in turn portrays the market’s indecision.

While the EURUSD traders are paring the biggest weekly loss in seven, the US jobs report for October will be crucial for near-term directions. Forecasts suggest that the headline US Nonfarm Payrolls (NFP) could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior.

Although the downbeat expectations concerning the US jobs report teasing EURUSD buyers, pessimistic comments from ECB’s Lagarde will be enough to keep the bears on the table.

Technical analysis

A clear downside break of an upward-sloping support line from late September, now resistance around 0.9775, keeps EURUSD bears hopeful to test the six-week-old horizontal support surrounding 0.9680. Also increasing the strength of the bearish bias are the downbeat MACD signals and the RSI (14) conditions.

• GBPUSD bulls look to move into the 50% mean reversion area of the prior bearish impulse on the daily chart, as illustrated above. 
• Bears need to break key support below 1.1100.

As per the prior analysis, GBPUSD Price Analysis: Bears move in on a fresh layer of support, from an hourly perspective, we have the bulls sitting at key support. fending off the bears as follows:

GBPUSD H1 chart, prior analysis

GBPUSD H1 chart update

GBPUSD H4 and daily charts

To put the upside prospects into the context of a higher time frame, then the four-hour chart shows a significant price imbalance between 1.1250 and 1.1380 if the bulls can get back above 1.1250. 

In doing so, the bulls will be on track for a move into the 50% mean reversion area of the prior bearish impulse on the daily chart, as illustrated above. 

• USDCAD prints mild losses while retreating from a fortnight top.
• Sustained break of key DMAs, impending bull cross on MACD favor buyers.
• Bears need validation from 1.3500 to retake the control.

USDCAD pares recent gains around a two-week high during Friday’s sluggish Asian session. In doing so, the Loonie pair retreats from a short-term key horizontal resistance area, declining to 1.3730 by the press time.

However, the receding bearish signals from MACD and a successful break of the 21-DMA keeps the USDCAD buyers hopeful unless the quote stays beyond the stated DMA support near 1.3700.

Even if the quote declines below 1.3700, a convergence of the 50-DMA and lows marked since late October offers a tough nut to crack for the USDCAD bears around 1.3500.

That said, the 1.3610 level and an upward sloping trend line from early August, close to 1.3320 at the latest, act as additional downside filters to watch during the pair’s further downside.

Meanwhile, recovery moves need to provide a daily closing beyond the 1.3825 level to enable the USDCAD bulls to question the yearly high, currently around 1.3980.

Following that, the 1.4000 round figure may act as an additional resistance to watch for the pair buyers before targeteing the 61.8% Fibonacci Expansion (FE) of the pair’s September-October moves, near 1.4130.

USDCAD: Daily chart

Trend: Further upside expected

• EURJPY has been dragged to a knee-jerk reaction low recorded on October 24 at 143.72.
• The 20-EMA is scrapping the upside attempts from the cross.
• Downward-sloping 200-EMA adds to the downside filters.

The EURJPY pair is displaying back-and-forth moves in a narrow range of 144.33-144.72 in the Tokyo session. Earlier, the cross rebounded from 144.00 but failed to extend its recovery above 144.76 amid the risk-off market mood. The pullback move has failed to gather momentum, which could result in further weakness in the pair.

On an hourly scale, the asset has been dragged to near the knee-jerk reaction low recorded on October 24 at 143.72. The knee-jerk reaction was considered an intervention by the Bank of Japan (BOJ) in the currency markets to support the Japanese yen.

The upside move in the cross has been restricted by the 20-period Exponential Moving Average (EMA) at around 144.62. And, the downward-sloping 200-EMA is hinting that the overall trend is bearish.

Meanwhile, the Relative Strength Index (RSI) (14) has attempted to shift into the 40.00-60.00 range but that doesn’t indicate a termination of the downside trend.

Should the cross drop below October 24 low at 143.72, the Japanese yen bulls will get strengthen further and will drag the asset towards the round-level support at 143.00, followed by October 13 low at 141.76.

On the contrary, the shared currency bulls will regain strength if the asset oversteps the round-level resistance of 146.00, which will send the asset toward Tuesday’s high at 147.06. A breach of the latter will drive the cross towards Monday’s high at 147.76.

EURJPY hourly chart

Japanese Finance Minister Shunichi Suzuki said on Friday, they have “no intention of guiding fx to certain levels by intervening.”

Additional comments

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 7.2555 vs. the last close of 7.3000.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day's closing level and quotations taken from the inter-bank dealer.

• Gold price holds lower ground after refreshing monthly low, sidelined of late.
• Pre-NFP consolidation triggers a corrective bounce from five-week-old ascending support line.
• Sour sentiment, firmer yields and hawkish Fed keep XAUUSD buyers hopeful ahead of US jobs report.

Gold price (XAUUSD) remains sluggish around $1,630, snapping a two-day downtrend, during early Friday. In doing so, the previous metal traders lick their wounds at the lowest levels in five weeks as traders await the key US jobs report.

In addition to the pre-data caution, a lack of major updates and the traders’ reassessments of the previous moves ahead of the weekend also seemed to have probed the XAUUSD bears of late.

The US dollar cheered the fears emanating from China, North Korea and Russia, as well as the strong yields, to regain the bull’s confidence after witnessing the heavy blow on the previous week, which in turn weighed on the gold prices of late.

That said, the US Dollar Index (DXY) rose the most in nearly a week despite mixed US data and downbeat inflation expectations. Talking about the data, US ISM Services PMI for October dropped to 54.4 from 56.7 prior and 55.5 market consensus. However, the Factory Orders matched 0.3% forecast versus 0.2% upwardly revised previous readings. It should be noted that the US S&P Global Composite PMI and Services PMI got an upward revision from their preliminary readings for the stated month whereas the Initial Jobless Claims eased to 217K for the week ended on October 28 versus 220K expected and 218K prior. On the other hand, US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, dropped to the lowest levels since October 19 and 13 in that order.

Amid these plays, the Wall Street benchmarks closed in the red while the US 10-year Treasury yields refreshed a one-week high to 4.22% before retreating to 4.15%. Notably, the US 2-year bond coupons rose to the highest levels since 2007. It should be noted that the S&P 500 Futures print mild losses while the yields are sidelined at the latest, which in turn portrays the market’s indecision.

To sum up, the US employment report for October could help XAUUSD traders to overcome the lack of momentum. Forecasts suggest that the headline US NFP could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior. That said, the downbeat forecasts for the scheduled statistics signal a corrective move from the key support line in case of a surprise.

Also read: US October Nonfarm Payrolls Preview: Analyzing gold's reaction to NFP surprises

Technical analysis

Gold price struggles to extend the bounce from an upward-sloping support line from September 28 as a one-week-old previous support line challenges the recovery moves near $1,632.

The metal’s inability to cross the nearby hurdle could also be witnessed by bearish MACD signals and sluggish RSI (14).

Hence, the quote is likely to remain depressed unless it stays below the nearby resistance, previous support around $1,632.

Even if the buyers manage to cross the $1,632 hurdle, the 100-EMA and 200-EMA will challenge the upside near $,1650 and $1,665 respectively ahead of directing the run-up towards the late October peak near $1,675.

Alternatively, the aforementioned support line near $1,620 holds the key to the XAUUSD fall towards the 61.8% Fibonacci Expansion (FE) of bullion’s October 04-26 moves, near $1,605. Following that, the $1,600 threshold may act as an extra filter to the south.

Gold: Four-hour chart

Trend: Further downside expected

• NZD/USD bears at bay as the markets move into consolidation ahead of the NFP.
• US jobs are in focus for the final day of the week.

NZD/USD is flat on the day as the markets move into a state of consolidation ahead of today's key event in the Nonfarm Payrolls, NFP. The pair have been whipsawed this week due to the US Federal Reserve's intent to continue hiking rates at a steep pace with a long way to go, according to the Fed Chairman, Jerome Powell. At the time of writing, the Kiwi is trading at 0.5770 and between a low of 0.5764 and a high of 0.5777. 

''The Kiwi continued peeling off after yesterday’s hawkish Fed meeting and 75bp hike, having unwound the initial spike and more. The USD regained favour as US short end interest rates hit new cycle highs,'' analysts at ANZ Bank said, adding the following:

''As if there should have been any doubt, the Fed has made it clear that it’s up to the task of tackling inflation, and for the time being, that’ll likely keep playing into the USD’s favour, especially if risk appetite continues to tumble.''

''Although there are reasons to be optimistic on the NZD given the strength of the local economy and clear need for world-beating higher policy rates here, which adds carry appeal, that may only help on non-USD crosses (where some NZD outperformance has been seen).''

The day ahead

Meanwhile, today's NFP will be important, but perhaps not as critical as next week's Consumer Price Index nor what Fed speakers will have to say in speeches today. Analysts at Westpac explained that a slowdown in the jobs data is widely anticipated in October though the unemployment rate will likely remain little changed for now allowing for growth in average hourly earnings to remain robust. Boston Fed president Susan Collins will speak as well on Friday who has been an advocate for higher rates argued in prior statements that “it will be important to see clear and convincing signs that inflation is falling.”

• AUDNZD has jumped to near 1.0920 despite the Aussie Retail Sales drop to 0.2%.
• RBA’s November monetary policy statement claims short-term inflation expectations at 8%.
• Australia’s GDP projections have dropped to 2.0% and 1.4% for H1CY22 and H2CY22 respectively.

The AUDNZD pair has witnessed buying interest despite the release of weaker Australian Retail Sales data. The Australian Bureau of Statistics has reported the Retail Sales for the third quarter at 0.2%, lower than the expectations of 0.45 and the prior release of 1.4%.

A significant decline in retail demand despite soaring price pressures signals that consumer demand has remained extremely weak. Households’ real income has been squeezed due to subdued earnings and accelerating price growth.

Apart from Retail Sales, the Reserve Bank of Australia (RBA) has released a monetary policy statement, which indicates that the Aussie dollar could face sheer volatility.

The Gross Domestic Product (GDP) projections for the first half of CY2023 are landed at 2.0% and 1.4% for the second half. Also, short-term inflation expectations have increased to 8.0% amid price growth in the service sector.

This week, the RBA continued its 25 basis points (bps) rate hike regime despite a significant jump in the inflation rate. The historic surge in Australian inflationary pressures was expected to compel RBA Governor Philip Lowe to return to a 50 bps rate hike structure. However, RBA Governor preferred to continue on the path of achieving price stability without deteriorating the economic prospects.

It is worth noting that the inflation rate for the third quarter landed at 7.3%, higher than the projections of 7.05 and the prior release of 6.1%. The projected terminal rate at 3.85% is intact, however, short-term inflation expectations are still de-anchored.

On the NZ front, investors are still in a hangover from upbeat Employment Change data. The economic data for the third quarter landed at 1.3%, higher than the estimates of 0.5%.

• AUDUSD remains pressured on witnessing downbeat catalysts from home.
• RBA MPS cuts economic forecasts, Australia’s Q3 Retail Sales eased.
• Pre-NFP trading lull restricts immediate moves even as DXY bulls take a breather.

AUDUSD extends pullback from intraday high to 0.6290 after unimpressive updates from the Reserve Bank of Australia’s (RBA) Monetary Policy Statement (MPS), as well as relating to the third quarter (Q3) details of Australia’s Retail Sales, published early Friday. It should be noted, however, that the market’s cautious mood ahead of the US jobs report restricts immediate moves of the Aussie pair.

RBA’s quarterly release of the MPS conveyed deteriorating growth prospects and higher inflation. Even so, the Aussie central bank defends the latest rate hikes. “Australia's central bank on Friday downgraded the outlook for economic growth, warning that more rate hikes will be necessary to bring down sky-high inflation even as it strives to avoid an outright recession,” said Reuters following the release. Additionally, Australia’s Q3 Retail Sales eased to 0.2% QoQ versus 0.4% expected and 1.4% prior.

It should be noted that the fears emanating from China, North Korea and Russia, as well as the firmer US dollar, keeps the AUDUSD sellers hopeful amid a sluggish session.

On Thursday, the US Dollar Index (DXY) rose the most in nearly a week despite mixed US data and downbeat inflation expectations. The reason could be linked to the market’s fears of higher rates and economic slowdown, as conveyed by policymakers from the Bank of England (BOE), the US Federal Reserve (Fed) and the European Central Bank (ECB).

Talking about the data, US ISM Services PMI for October dropped to 54.4 from 56.7 prior and 55.5 market consensus. However, the Factory Orders matched 0.3% forecast versus 0.2% upwardly revised previous readings. It should be noted that the US S&P Global Composite PMI and Services PMI got an upward revision from their preliminary readings for the stated month whereas the Initial Jobless Claims eased to 217K for the week ended on October 28 versus 220K expected and 218K prior. On the other hand, US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, dropped to the lowest levels since October 19 and 13 in that order.

At home, mixed data from Australia and China also exerted downside pressure on the AUDUSD prices of late. That said, China’s Caixin Services PMI for October dropped to the lowest level in five months while flashing 48.4 figure versus 49.3 prior. Further, Australia’s trade surplus increased to 12,444M in September versus 8,850M expected and 8,324M prior while the Exports rallied by 7.0%, compared to 2.6% prior. However, the growth of the Imports dropped to 0.4% versus 4.5% prior.

Earlier in the day, Australia’s AiG Performance of Construction Index for October eased to 43.3 versus 46.5 prior.

Against this backdrop, the Wall Street benchmarks closed in the red while the US 10-year Treasury yields refreshed a one-week high to 4.22% before retreating to 4.15%. Notably, the US 2-year bond coupons rose to the highest levels since 2007. It should be noted that the S&P 500 Futures print mild losses while the yields are sidelined at the latest.

Having witnessed the initial reaction to the key data/events from Australia, AUDUSD traders may witness a lackluster session ahead of the US employment report for October. Forecasts suggest that the headline US NFP could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior. That said, the downbeat forecasts for the scheduled statistics signal a corrective move from the key support line in case of a surprise.

Also read: US October Nonfarm Payrolls Preview: Analyzing gold's reaction to NFP surprises

Technical analysis

AUDUSD bears need a daily closing below a three-week-old support line, around 0.6275 by the press time, to aim for the yearly low of 0.6170. The recovery moves, however, remain elusive below October’s peak of 0.6525.

Reuters reports that Australia's central bank on Friday downgraded the outlook for economic growth, warning that more rate hikes will be necessary to bring down sky-high inflation even as it strives to avoid an outright recession.

In its quarterly Statement on Monetary Policy, SoMP, the Reserve Bank of Australia (RBA) raised its forecasts for inflation as it predicts higher wage growth ahead, and foreshadowed a faster pick-up in unemployment next year. 

Key notes

"There are many uncertainties surrounding these forecasts that make the path to achieving the Board's objective of returning inflation to target while keeping the domestic economy on an even keel a narrow one," said the RBA.

Board expects rates will need to increase further.
    
Not on pre-set path, will hike in larger steps or pause if considered necessary.
    
Rates have already risen significantly, mindful policy operates with a lag.

Sees global growth slowing significantly, risks from synchronised central bank tightening.
    
Domestic effect of rising energy prices to be much greater than first assumed.
    
Retail gas and electricity prices seen rising 20-30% over 2023.
    
Cuts economic growth forecasts sees GDP Dec 2022 2.9%, Dec 2023 1.4%,Dec 2024 1.6%.
    
Lifts inflation forecasts sees CPI Dec 2022 8.0%, Dec 2023 4.7%, Dec 2024 3.2%.
    
Forecasts trimmed mean inflation Dec 2022 6.5%, Dec 2023 3.8%, Dec 2024 3.2%.
    
Lifts unemployment forecasts sees Dec 2022 3.4%, Dec 2023 3.7%, Dec 2024 4.3%
    
Lifts wage growth forecasts sees Dec 2022 3.1%, Dec 2023 3.9%, Dec 2024 3.9%.
    
Forecasts assume cash rate peaks around 3.5%, falls to 3.0% by end 2024.
    
Many uncertainties surrounding these forecasts, particularly on consumption.
    
Wage-, price-setting behaviour a material risk to inflation outlook.
    
Risks to China's economy skewed to downside by zero-covid rules, property weakness.

AUD/USD update

Meanwhile, AUD/USD was unchanged on the notes from the SoMP. 

About the SoMP

The RBA Monetary Policy Statement released by the Reserve bank of Australia reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. It is considered as a clear guide to the future RBA interest rate policy. Any changes in this report affect the AUD volatility. If the RBA statement shows a hawkish outlook, that is seen as positive (or bullish) for the AUD, while a dovish outlook is seen as negatvie (or bearish).

• GBPJPY has sensed fresh demand around 165.10 on expectations of BOJ’s repeat intervention plans.
• UK’s recession situation will be two years longer than observed in the period of the global financial crisis.
• A firmer rebound in USDJPY may result in a repeat of BOJ’s intervention in the currency market.

The GBPJPY pair has picked significant bids after testing Thursday’s low around 165.10 in the early Tokyo session. The cross has been supported despite the headwinds of risk-off impulse and deepening UK recession. The risk-off mood is extending its period as S&P500 futures have continued their downside momentum in the Tokyo session.

The asset has sensed fresh demand around 165.10 despite the bleak growth outlook in the UK economy due to a recession situation. In the monetary policy announcement by the Bank of England (BOE) on Thursday, BOE Governor confirmed that the UK economy is in recession and the situation will last potentially two years more than observed in the period of the subprime crisis.

BOE Governor hiked the interest rates by 75 basis points (bps) for the first time since 1989 as the inflationary pressures have settled above double-digit figures and are harming the economic prospects. Weaker economic prospects have left less room for more rate hikes as an attempt of the same would result in severe jobless numbers and claims that may dampen the economic situation.

On the Tokyo front, investors are worried about Japan-North Korea renewed tensions after North Korea fired an unidentified ballistic missile over Japan, as broadcasted by NHK. For safety measures, Japan administration warned residents to take shelter from missile threats. Apart from that, a firmer rebound in the USDJPY pair has triggered expectations for repeat intervention by the Bank of Japan (BOJ) to support the Japanese yen against sheer volatility.

• US Dollar Index looks set for the biggest weekly gain in seven despite recent inaction.
• Hawkish Fed, risk aversion joins strong US Treasury yields to favor DXY bulls.
• Inflation expectations, mixed data failed to probe buyers.
• Strong NFP appears necessary for bulls to keep the reins.

US Dollar Index (DXY) bulls take a breather around the highest levels in three weeks ahead of the all-important US Nonfarm Payrolls (NFP) on Friday. Even so, the greenback’s gauge versus the six major currencies brace for the biggest weekly jump in seven, also eyeing to snap a two-week downtrend, as it takes rounds to 113.00 by the press time.

Hawkish updates from the US Federal Reserve (Fed) appeared to be the most important catalyst that propelled the DXY of late. Adding strength to the upside momentum were the fears emanating from China, North Korea and Russia, as well as the firmer US Treasury yields.

In doing so, the US Dollar Index paid little heed to the mixed US data and downbeat inflation expectations.

That said, US ISM Services PMI for October dropped to 54.4 from 56.7 prior and 55.5 market consensus. However, the Factory Orders matched 0.3% forecast versus 0.2% upwardly revised previous readings. It should be noted that the US S&P Global Composite PMI and Services PMI got an upward revision from their preliminary readings for the stated month whereas the Initial Jobless Claims eased to 217K for the week ended on October 28 versus 220K expected and 218K prior.

On the other hand, US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, dropped to the lowest levels since October 19 and 13 in that order.

Amid these plays, the Wall Street benchmarks closed in the red while the US 10-year Treasury yields refreshed a one-week high to 4.22% before retreating to 4.15%. Notably, the US 2-year bond coupons rose to the highest levels since 2007. That said, the S&P 500 Futures print mild losses while the yields are sidelined at the latest.

Looking forward, DXY may witness further grinding amid a lack of major data/events ahead of the US employment report for October. Forecasts suggest that the headline US NFP could ease to 200K in October from 263K prior while the US Unemployment Rate may increase to 3.6% from 3.5% prior. That said, the downbeat forecasts for the scheduled statistics signal a corrective move in case of a surprise.

Technical analysis

Unless declining back below the 21-DMA immediate support near 112.15, the US Dollar Index is likely approaching the five-week-old resistance line, close to 113.50 at the latest.

AUDUSD is up for the key moves as the Reserve Bank of Australia (RBA) is up for justifying its latest moves, via the quarterly Monetary Policy Statement (MPS) at 00:30 AM GMT on Friday. It should be noted that the quarterly readings of the Aussie Retail Sales for the third quarter (Q3) will also be rolled out at the stated time and appears the key for the pair traders.

Given the RBA’s softer rate hike of 25 basis points (bps), in contrast to the inflation fears raised by the Bank of England (BOE) and the US Federal Reserve (Fed), today’s RBA MPS becomes the key for the AUDUSD traders.

In addition to the reasons that back the latest moves, the RBA’s quarterly economic forecasts will also be important to watch for near-term directions.

Ahead of the data/events, Westpac said,

How could it affect AUDUSD?

AUDUSD pares the biggest daily loss in two weeks while printing mild gains around 0.6300 ahead of the RBA MPS. The reason could be linked to the market’s preparation for the key event, as well as consolidation before the US jobs report for October.

That being said, the RBA has already conveyed its readiness for further rate hikes and signaled economic resilience during the latest move on Tuesday. However, the likeliness of softer rate hikes in the future and a small span of higher rates left will be interesting to read for the AUDUSD pair sellers.

Technically, a three-week-old ascending support line near 0.6275 challenges the AUDUSD bears targeting the yearly low of 0.6170. Alternatively, recovery moves need validation from the 21-DMA immediate hurdle near 0.6335.

Key notes

AUDUSD: Recessionary fears in Australia and a hawkish Federal Reserve, to keep AUDUSD pressured

AUDUSD Forecast: Battling to retain the 0.6300 threshold

About RBA Monetary Policy Statement

The RBA Monetary Policy Statement released by the Reserve bank of Australia reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. It is considered as a clear guide to the future RBA interest rate policy. Any changes in this report affect the AUD volatility. If the RBA statement shows a hawkish outlook, that is seen as positive (or bullish) for the AUD, while a dovish outlook is seen as negative (or bearish).