On Thursday the 4th of October, trading on the euro closed up. The single currency rebounded from a low of 1.1463. This rise was facilitated by a broadly weaker dollar as well as the closing of short positions in anticipation of today’s employment report from the US.
The rise of the British pound also led traders to open long positions on the euro. The EU’s chief Brexit negotiator, Michel Barnier, announced that the EU and UK had entered the final stages of negotiations. The current situation on the Forex market favours the further recovery of the euro. Buyers just need to weather the NFP report.
Day’s news (GMT 3):
- 09:00 Germany: factory orders (Aug), PPI (Aug).
- 09:45 France: trade balance (Aug).
- 10:15 Switzerland: CPI (Sep).
- 10:30 UK: Halifax house prices (Sep).
- 15:30 US: trade balance (Aug), nonfarm payrolls (Sep), average weekly hours (Sep), average hourly earnings (Sep), labour force participation rate (Sep).
- 15:30 Canada: imports (Aug), exports (Aug).
- 20:00 US: Baker Hughes US oil rig count.
Fig 1. EURUSD hourly chart.
The euro recovered 67 degrees against the greenback. The pair first rebounded upwards from the 112th degree, and then downwards from the trend line. Markets are holding their breath as they await the release of US data.
There’s no forecast on today’s chart given the importance of the statistics coming out later. The US will publish a report of the number of new jobs created in September. The ADP report significantly exceeded expectations, so the NFP could too. Growth in employment is expected to pick up where it left off in August, with about 200k new jobs expected.
I reckon that volatility will be high following the report’s release. The thing is that Fed Chair Jerome Powell has hinted at an aggressive tightening of monetary policy. For this, today’s economic data should come out higher than expected. Any shortcomings on this front will cause the US dollar index to fall and the other major currencies to rise.
The EURUSD pair is currently trading around the trend line. Traders have their protective stop levels at 1.1543. If the NFP report posts fewer than 180k new jobs, the euro will jump to 1.1600. If unemployment rises, and the values for the previous two months are revised downwards, the pair is likely to rise as far as 1.1629. If the NFP comes out at 220k or higher, we can expect the pair to revisit to low of 1.1463, followed by a sharp rebound ahead of the weekend.