• USD/JPY extends fall alongside bond yields to start the session
• Risk on the retreat as bond yields fall
• Preview: Why August non-farm payrolls frequently disappoint
• What would it take from non-farm payrolls to get a 50 basis point cut?
• We’ve seen the flop and the turn, it is now on to the river
• What are the distribution of forecasts for the US NFP?
• Weekly update on interest rates expectations
• Eurozone Q2 final GDP +0.2% vs +0.3% q/q second estimate
• Germany July industrial production -2.4% vs -0.3% m/m expected
• Germany July trade balance €16.8 billion vs €21.0 billion expected
• France July trade balance -€5.88 billion vs -€6.09 billion prior
• UK August Halifax house prices +0.3% vs +0.2% m/m expected

Markets:

• JPY leads, AUD lags on the day
• European equities lower; S&P 500 futures down 0.6%
• US 10-year yields down 3.4 bps to 3.698%
• Gold up 0.1% to $2,519.39
• WTI crude up 0.5% to $69.51
• Bitcoin down 0.2% to $55,977

It’s all about the US jobs report today and there wasn’t too much to work with in European trading as such.

There was some minor positioning flows early on, with traders keeping a bid in bonds. 10-year Treasury yields fell to just under 3.70% and that triggered some safety flows in broader markets.

USD/JPY fell from around 142.90 in Asia to a low of 142.06 before recovering back to near 143.00 again now. Meanwhile, USD/CHF also retreated to a low of 0.8405 before keeping down 0.2% at 0.8420 currently.

In the equities space, US futures were lightly changed early on but then fell across the board with tech shares leading the drop. S&P 500 futures were marginally lower by 0.1% in the handover from Asia to Europe. But that eventually spilled to a 0.8% drop at one point before holding just above that now.

With traders potentially sensing more kicking and screaming, this is arguably the most anticipated US jobs report of the year so far.

Market pricing for a 50 bps move by the Fed is ~40% now. So, we’ll see how that as well as global growth concerns will change up after we get to the main event this week.

This article was written by Justin Low at www.forexlive.com.

It’s been a rough week for crude
oil as the price dropped more than 6% on renewed growth fears amid a couple of
soft US data. The delay
by OPEC+ to increase production from October didn’t spark a rally but it helped
to slow down the bearish momentum.

A lot now hinges on the US
NFP report today as good data should trigger a relief rally, while weak figures
will likely increase the bearish momentum on recessionary fears.

Crude Oil
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that crude oil broke below the recent low around the 71.60 level and
extended the drop into the 69 handle. If the selloff extends further, we can
expect the buyers to step in around the 67.68 level to position for a rebound
into the 71.60 level. The sellers, on the other hand, will want to see the
price breaking lower to increase the bearish bets into the 64 support
zone.

Crude Oil Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a downward trendline defining the bearish momentum. We
can expect the sellers to keep leaning on the trendline to position for further
downside, while the buyers will want to see the price breaking higher to start
targeting new highs.

Crude Oil Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that the bearish momentum waned a bit as the price action became rangebound.
Today we have the US NFP report and good figures will likely trigger a rally,
while weak data might increase the bearish momentum. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we conclude the week with the US NFP report where the consensus sees
160K jobs added and a 4.2% unemployment rate.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

The plunge in early August when markets were throwing a tantrum was held by the December 2023 lows, at least on the daily chart. But even so, the pair has been trending in a lower highs, lower lows pattern ever since June this year.

The trend speaks to a check back in optimism in European equities in particular as well. That especially following the French snap election. But it also comes as bond yields fall and broader markets are also holding more cautious, even more so after the carry trade unwind episode.

And if risk trades are to falter again amid a softer US labour market report, that may be a good enough recipe for EUR/CHF to retest its record lows under 0.9300 next. That as market players will be chasing a flight to safety.

The consideration now is how much are markets really afraid of a hard landing in the US and the overall global growth outlook. Sure, employment conditions are softening but other data continues to suggest that things aren’t that bad for the US economy. But even so, are we going to see markets overreact again?

While the focus is on the Fed and the debate on 25 bps vs 50 bps this month, any tantrums thrown by markets will impact risk-related currencies. And EUR/CHF is one of that, so it is one I’d keep an eye out for – especially considering the charts.

If validated, the only key risk to any further downside is actually the SNB. The central bank has noted that they are watching closely the franc and have come out to say that its recent strength isn’t too welcome for the economy.

As such, there could be the potential for the SNB to intervene if things go too far, too fast.

This article was written by Justin Low at www.forexlive.com.

This week the growth fears
came back as the we got a couple of soft US data. Most of the weakness can be
attributed to the ISM Manufacturing PMI which disappointed as it missed
expectations, and the new orders index dropped further into contraction.

Overall, the report was
much better than the prior month, but it looks like the market wanted to err on
the defensive side heading into the NFP report. We also got the US Job Openings data on Wednesday, but it was
July’s data which was bad for many other indicators as it looks like short term
factors negatively affected the data.

We are going into the NFP release
with basically a 50/50 chance of either a 25 bps or 50 bps cut at the upcoming
meeting, so the data will decide by how much the Fed is going to cut.

In today’s context though, the
prospect of a 50 bps cut amid weaker labour market data might not be enough to
lift the stock market and could actually lead to more downside on recessionary
fears, so that’s something to keep in mind.

Russell 2000
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the Russell 2000 is now testing the major trendline.
This is where we can expect the buyers to step in with a defined risk below the
trendline to position for a rally into a new cycle high. The sellers, on the
other hand, will want to see the price breaking lower to increase the bearish
bets into the 1993 level next.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a strong support zone around the 2120 level where we can find
the confluence of the 50% Fibonacci retracement, trendline and the previous resistance
now turned support.

This is where the buyers
will likely pile in with a defined risk below the support to position for a
rally into a new cycle high. The sellers, on the other hand, will look for a
break lower to increase the bearish bets into the 1993 level.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that after the push lower on the ISM Manufacturing PMI, the bearish
momentum started to wane as the price action became mostly rangebound. We have
formed what looks like a falling
wedge right around the support zone.

This is generally a
reversal pattern, but a failed pattern can also be meaningful, so watch carefully
what happens after the NFP release today. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we conclude the week with the US NFP report where the consensus sees
160K jobs added and a 4.2% unemployment rate.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior +0.3%

Looking at the breakdown, household consumption was more or less negligible on the quarter and that is the same for changes in inventories. Government expenditure contributed 0.1% while gross fixed capital formation fell by 0.5%. The latter was offset by trade i.e. exports less imports, which contributed 0.5% on the quarter.

Anyway, this just reaffirms some resilience in the euro area economy in Q2 but things have slowed down quite a fair bit in Q3.

This article was written by Justin Low at www.forexlive.com.

• USD/JPY on the edge as yields look to leg down further
• What are the main events for today?
• BOJ’s Takata: No preset idea on any ceiling for rates
• BOJ’s Takata: No specific timing in mind in scrutinising economy, price developments
• ECB seen cutting rates next week and then again in December – poll
• Eurozone July retail sales +0.1% vs +0.1% m/m expected
• Germany July industrial orders +2.9% vs -1.5% m/m expected
• Germany August construction PMI 38.9 vs 40.0 prior
• UK August construction PMI 53.6 vs 54.9 expected
• PBOC to continue to implement supportive policy, says deputy governor

Markets:

• EUR and GBP lead, USD and CAD lag on the day
• European equities mixed; S&P 500 futures up 0.1%
• US 10-year yields flat at 3.768%
• Gold up 0.9% to $2,516.01
• WTI crude up 0.5% to $69.53
• Bitcoin down 2.2% to $56,740

It was a modestly quiet session and understandably so, as market players are waiting on key US data later before making their move.

Coming up, we will have the ADP employment change, weekly initial jobless claims and ISM services PMI all to work through. So, traders are not really committing too much for the time being.

The dollar was lightly changed for the most part but is now marginally lower at the balance across the board. EUR/USD held around 1.1080-90 mostly but is now up by 0.2% to 1.1105. Similarly, GBP/USD held mostly around 1.3150-60 during the session before inching up to 1.3170 currently.

The moves are not too drastic by any stretch of the imagination. But it certainly spells out caution for the dollar, especially after the softer JOLTS job openings yesterday.

USD/JPY remains one of the more volatile pairs with it nudging lower to 143.05 after BOJ Takata’s comments earlier in the day. The pair then bounced back to 143.50 and is keeping thereabouts, down just 0.1% on the day.

In the equities space, European indices opened lower but are now keeping more mixed as US futures pared marginal losses to sit barely higher on the day. Treasury yields are also not doing a whole lot as all eyes are fixated on key US data to come.

Looking over to commodities, oil is trying to stay afloat after yesterday’s setback but is still keeping below $70 on the day. Meanwhile, gold is looking poised in trying to angle for a stronger breakout as it hovers around $2,516 now.

It’s all on the US data later to drive the next move in markets before the non-farm payrolls tomorrow.

This article was written by Justin Low at www.forexlive.com.

The poll shows that 64 of 77 economists (~85%) predict the ECB will cut rates by 25 bps at next week’s meeting and then again in December. Four other respondents expect just one 25 bps rate cut for the remainder of the year while eight are seeing three rate cuts in each remaining meeting.

In the August poll, 66 of 81 economists (~81%) saw two more rate cuts for the year. So, it’s not too major a change up in views.

For some context, the ECB will meet next week and then again on 17 October before the final meeting of the year on 12 December.

Looking at market pricing, traders have more or less fully priced in a 25 bps rate cut for next week (~99%). As for the remainder of the year, they are seeing ~60 bps of rate cuts at the moment. Looking further out to the first half of next year, there is ~143 bps worth of rate cuts priced in.

The nearly two-and-a-half rate cuts priced in for the rest of 2024 is going to be an interesting one to keep up with in the months ahead. The ECB seems to be leaning towards a rate cut roughly once in every three months, skipping one meeting. So, that’s what economists are picking up on I guess. For some background: A growing rift at the ECB on the economic outlook?

This article was written by Justin Low at www.forexlive.com.

This week the growth fears
came back as the we got a couple of soft US data. Most of the weakness can be
attributed to the ISM Manufacturing PMI which disappointed as it missed
expectations, and the new orders index dropped further into contraction.

Overall, the report was
much better than the prior month, but it looks like the market wants to err on
the defensive side heading into the NFP report tomorrow. We also got the US Job Openings data yesterday, but it was July’s
data which was bad for many other indicators as it looks like short term
factors negatively affected the data.

We are going into the NFP
report with a 50/50 chance of either a 25 bps or 50 bps cut at the upcoming
meeting, so the data tomorrow will decide by how much the Fed is going to cut.

In today’s context though,
weaker labour market data and the prospect of a 50 bps cut might not be enough
to lift the stock market and could actually lead to more downside on
recessionary fears, so that’s something to keep in mind.

Nasdaq
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the Nasdaq eventually couldn’t break back above the 19728 level and
sold off into the 18900 level as the US data disappointed the market. The next support is near at 18737 level where we can expect the
buyers to step in with a defined risk below the level to position for a rally
into new highs. The sellers, on the other hand, will want to see the price
breaking lower to increase the bearish bets into the major trendline.

Nasdaq Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price got rejected from the swing low level at 19135. This is
going to be a key level the buyers will need to break to position for a rally
into the downward trendline around the 19500 level. The sellers, on the other
hand, will likely lean on the 19135 level to position for a break below the
18737 level.

Nasdaq Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see the rangebound price action as we await the NFP release. Today we will also
get other labour market data but unless we get big surprises, it’s unlikely to
see a breakout today. The red lines define the average daily range for today.

Upcoming Catalysts

Today we have the US ADP, the US Jobless Claims and the US ISM Services PMI.
Tomorrow, we conclude the week with the US NFP report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

The changes among major dollar pairs are roughly 0.1% or less at the moment. And that exemplifies the more tentative mood that is gripping traders in European morning trade. USD/JPY was again the more volatile pair, dipping to a low of 143.05 before bouncing back to around 143.50 levels now. But outside of that, the moves so far today are extremely guarded as traders are eyeing key US data later on.

US futures are flat and 10-year Treasury yields are also now near unchanged at 3.768% on the day.

All together, it suggests that market players are very much waiting on US data later before committing to anything. We’ll have the ADP employment change, weekly initial jobless claims, and then the ISM services PMI all on the data docket.

Following the reaction to the Bank of Canada and JOLTS job openings yesterday, do expect markets to start moving with more vigour after the data today. And all of this will culminate with the non-farm payrolls report tomorrow of course.

For now, the wait continues. The ADP roulette will be up next first and that is in roughly two hours‘ time.

As an aside, one spot to keep an eye out for is gold as well. The precious metal is up 0.8% to $2,515 today and looks poised again to try and chase a firmer breakout.

This article was written by Justin Low at www.forexlive.com.

This week the growth fears came
back as the we got a couple of soft US data. Most of the weakness can be
attributed to the ISM
Manufacturing PMI which disappointed as it missed expectations, and the new
orders index dropped further into contraction.

Overall, the report was much
better than the prior month, but it looks like the market wants to err on the
defensive side heading into the NFP report tomorrow. We also got the US
Job Openings data yesterday, but it was July’s data which was bad for many
other indicators as it looks like short term factors negatively affected the
data.

We are going into the NFP
report with a 50/50 chance of either a 25 bps or 50 bps cut at the upcoming
meeting, so the data tomorrow will decide by how much the Fed is going to cut.

In today’s context though,
weaker labour market data and the prospect of a 50 bps cut might not be enough
to lift the stock market and could actually lead to more downside on
recessionary fears, so that’s something to keep in mind.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the S&P 500 eventually couldn’t break above the 5665 level and
fell into new lows as the sellers piled in on a key breakout on the lower
timeframe and the ISM Manufacturing PMI missed expectations. There’s not much
we can glean from this chart as the market is just waiting for the NFP report.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the failure to break above the 5665 level and then the break
below the trendline which triggered more selling pressure. The price is now
consolidating between the 5506 and 5560 levels. The buyers will want to see the
price breaking higher to position for a rally into the 5665 level, while the
sellers will look for a break lower to increase the bearish bets into the 5432
level.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see more clearly the rangebound price action as we await the NFP release. Today
we will also get other labour market data but unless we get big surprises, it’s
unlikely to see a breakout today. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we have the US ADP, the US Jobless Claims and the US ISM Services PMI.
Tomorrow, we conclude the week with the US NFP report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.