Global financial markets have been hit by a plethora of fresh economic updates this week, and volatility across products has increased. Now, investors are looking ahead to the key U.S. employment data, which will be released during the final trading session of the week.
The Federal Reserve all but confirmed a September rate cut for the market yesterday at the conclusion of its latest meeting, and the market was clearly pricing this in. Now, the focus will be on Friday’s data and whether this will push the case for an increase in the pace of rate cuts.
The expectation is for the headline Non-Farm Employment Change to show an increase of 176k jobs in the last month, with Hourly Average Earnings remaining stable at a 0.3% increase and the Unemployment Rate staying at 4.1%. Any prints significantly different from these expectations could lead to big moves in the dollar as forward expectations for rate moves are recalibrated.
Aside from the significant depreciation we have seen in the greenback against the yen, the dollar has remained relatively strong against the other majors while treasury yields have pulled back to multi-month lows. Many in the FX market are now looking for the next catalyst to take the dollar into fresh ranges against other major currencies, and the blue-ribbon employment data due out as market liquidity thins after a long trading week could be just what they are looking for.
The euro is now sitting in the middle of recent ranges on the daily chart, and a print significantly off expectations on Friday in the New York session could see either side of this range challenged. Initial resistance is now around the 1.0920 level, and lower prints should see this come into focus swiftly, with a break here opening the way for a move up to the December 2023 high just above 1.1100. Conversely, a surprise stronger result would see trendline support at 1.0735 challenged, with a break lower then bringing the 2024 low into focus just under 1.0600.
Resistance 2: 1.1139 – December 2023 High
Resistance 1: 1.0923 – Trendline Resistance
Support 1: 10735 – Trendline Support
Support 2: 1.0591- 2024 Low
