Daily Commentary
 | 05/10/2018

USD steadies ahead of US employment report

USD seems to have steadied against a number of currencies, ahead of the US employment report for September later today (12:30 GMT). The employment report forecasts include a drop of the NFP figure (Forecast: 185k vs. Prior: 201k), the unemployment rate (Forecast:3.8% vs. Prior: 3.9%) and the average earnings growth rate (Forecast:+2.8% yoy vs Prior:+2.9% yoy). Despite the drops, one could argue that the overall picture is of a rather tight labour market and could provide some support for the USD. As the market seems to have positioned itself ahead of the release, a possible disappointment of the market from the actual rates and figures could have an asymmetrical response on the downside for the USD. Higher volatility is expected for the USD at the time of the release of the US employment report, however the overall effect could last longer.

USD/JPY remained at similar levels near (but above) the 113.60 (S1) support line. Technically, the pair has left the upward trend-line incepted since the 7th of September intact and for our bullish bias to be removed, we would need to see the pair’s price action, clearly breaking the prementioned trend line. Should the bulls continue to dictate the pair’s direction, we could see the pair breaking the 114.75 (R1) resistance line while if the bears take over we could see it breaking the 113.60 (S1) support line and aim for the 112.80 (S2) support level.

Budget assumptions of Italian government deemed as unrealistic

The Italian government forecasted that the GDP growth rate for 2019 would reach +1.5% and +1.6%, 1.4% in the years to follow. Analysts have commented that the assumptions are “unrealistic” and more on the optimistic side. Analysts also point out that the high GDP target may carry a high degree of slippage risk, with negative effects. The picture remains incomplete though, as targeted debt levels remain to be released and could cause further headlines. Should there be further pressure from the markets or the EU, we could see volatility rising for the common currency.

EUR/USD rose yesterday and broke the 1.1480 (S1) resistance line, now turned to support. The Asian session seems to suggest a stabilization of the pair but for our bearish outlook to change in favor of a sideways movement, we would require the pair’s price action to clearly break the downward trend-line incepted since the 27th of September. Should the pair continue to be under selling interest we could see it breaking the 1.1480 (S1) support line and aim for the 1.1420 (S2) support barrier. On the flip side, should the market favor the pair’s long positions we could see it breaking the 1.1525 (R1) resistance line and aim if not break the 1.1577 (R2) resistance hurdle.

In today’s other economic highlights:

In a busy Friday, in the European session we get Germany’s industrial orders growth rate and producer prices for August. In the American session from Canada we get the employment data for September and the trading balance figure for August, while from the US, besides the US employment report, we get the Baker Hughes oil rig count. As for speakers, Atlanta Fed president Raphael Bostic speaks.

USD/JPY 4H

Support: 113.60 (S1), 112.80 (S2), 112.05 (S3)

Resistance: 114.75 (R1), 115.60 (R2), 116.25 (R3)

EUR/USD 4H

Support: 1.1480 (S1), 1.1420 (S2), 1.1360 (S3)

Resistance: 1.1525 (R1), 1.1577 (R2), 1.1630 (R3)