On Friday the 3rd of November, trading on the euro/dollar pair closed down. Volatility surged during the US session. I don’t even know whether the stop levels of intraday traders managed to withstand the US data or not.
The US Department of Labour announced that 261,000 new jobs were created in October against a loss of 33,000 the previous month. Markets were expecting an increase of 310,000. The reading for August was revised upwards from 169,000 to 208,000, and for September from -33,000 to 18,000. The aggregate revision comes to 90,000.
The growth in US employment sped up in October after the hurricanes took their toll on the labour market in September. There were also some hints that the labour market’s growth is slowing down due to reduced wage growth. Average hourly earnings dropped by 0.04% month on month to 26.53 USD (forecast: 0.2%). The workforce participation rate dropped from 63.2 to 62.7.
After the US labour market report, the euro initially reacted with a sharp surge, renewing Thursday’s high of 1.1690, but sellers quickly recovered their losses and went into positive territory on the back of the positive ISM services PMI. The euro dropped against the dollar to 1.1599.
- ISM services PMI (Oct): 60.1 (forecast: 58.5, previous: 59.8).
- Factory orders (Sep): 1.4% MoM (forecast: 1.2% MoM, previous: 1.2% MoM).
Day’s news (GMT 3):
- 10:00 Germany: factory orders (Sep).
- 11:15 Switzerland: CPI (Oct).
- 11:55 Germany: Markit services PMI (Oct).
- 12:00 Eurozone: Markit services PMI (Oct).
- 12:30 Eurozone: Sentix investor confidence (Nov).
- 13:00 Eurozone: PPI (Sep).
- 18:00 Canada: Ivey PMI (Oct).
- 20:10 USA: Fed’s Dudley Williams speech.
Fig 1. EURUSD rate on the hourly. Source: TradingView
During trading in Asia, the euro dropped to 1.1597. Since the euro closed down on Friday after the payrolls report, my forecast today goes against Friday’s movements. I’m expecting some correctional movement to 1.1640. Ideally, the price won’t go any higher than this or else sellers may once again lose control of the situation.
I didn’t want to show the 67th degree on today’s chart, but it’s needed. There’s a high risk of a sharp recovery to 1.1678 or higher. The Catalonian crisis is at the centre of attention for traders. Belgian authorities were issued arrest warrants for Carles Puigdemont and four of his former ministers. They have turned themselves in to the Belgian police. The Belgian courts granted them conditional release with the group scheduled to appear in court within 15 days. As far as I understand, we could have a decision as soon as this evening. Any positive news from Spain will push the euro up.
Let’s not forget about the inverse head and shoulders model. It’s working out for now, but it won’t complete its formation if the daily candlestick closes above 1.1660. Ideally, the price will rebound from the LB balance line and close around 1.1630.