Market Analysis: 7 October, 2016

US Non Farm Payroll

by Christala Parmaxi

Overview

Pound Flash Crash

The British Pound plunged during the early Asian Morning, with Cable down to the price level of 1.184 in a matter of two minutes. The Cable fell from around 1.26 to 1.18 by reaching a 6% decline but it immediately went back to the levels of 1.24. The Pound’s Flash Crash is blamed on automated trading or fat finger trade in combination with the lack of liquidity at 2AM server time. Fat finger trades happen when a keyboard input error creates a far higher volume than the intended size, price targets or instrument, which results in placing unintended market orders. The sharp drop came after Financial Times newspaper published an online article about the French President Francois Hollande demanding hard Brexit negotiations, so there is also the possibility of fundamental based algorithms reacting to this report. What mostly worries investors is that the Cable did not manage to recover up to the level of 1.26 yet.

US Economic Data

Today is a big day for the USD! Investors are expecting the US Non-Farm Payroll and the Unemployment Change reports of September with a great interest. Besides the fact that those reports are the most important economic indicators for the health of the US economy, the FOMC members were clear on their statements that the growth pace of the labor market will be a major parameter for the rate hike decision. The NFP report lost expectations in August with the actual amount release lying at 151K against the forecasts of 180K. The media are expecting a figure of 175K for September and a stable 4.9% unemployment rate.

US Non Farm Payroll

US Non Farm Payroll

 

That said, during its last policy meeting, the Fed expressed its confidence in the US economic growth but this was not enough for a rate hike. Besides, with the US presidential election coming up in November, a rate move in this timeframe could be risky. On the other hand, September’s economic indicators have been supportive so far. The Consumer Confidence Index increased above 100 at 9-year high, the Consumer Sentiment Index beat expectations at 91.2, ISM Non-Manufacturing PMI was released at one-year high, ISM manufacturing PMI beat expectations as it released above 50 and the Average Jobless Claims dropped by 10k. The only indicator that is not supportive for a high NFP report is the ADP Non-Farm Employment Change which missed expectations of 166K by 12K.  If the NFP is above 200K then we expect a rally of the Dollar against the G7. On the other hand, if the figure is lower than 150K, that would be a good starting point for Greenback’s consolidation to the downside after a strong week.

US Unemployment Rate

US Unemployment Rate

Economic Calendar

The NFP report and Unemployment change will be released today at 15:30 server time. Furthermore, at 15:30 the US monthly Average Hourly Earnings are expected at 0.2% against the 0.1% of the last month and private NFP is expected at 170K against August’s 126K. At the same time, the Canadian Employment Change of September is expected at 10K against the 26.2K of the last month. The reaction of the Canadian Employment Change report together with US economic releases will be very interesting for USDCAD. The expectations for both of them are supportive for USDCAD and if they are verified by the actual reports then the USDCAD will surge to new record high levels. Later, at 17:00 server time there is more news from Canada; the Ivey PMI report will be released.

 

Technical View

USDCAD

The Loonie keeps on rising and it is testing again the resistance of 1.327. The daily indicators are on bullish territories indicating buy signals while the price penetrated SMA200 to the upside.  Upon penetration of the strong resistance level of 1.327, the next valid target is the psychological resistance level of 1.34 which is a high of 7 months. On the flip side, the risks are near the support levels of 1.305 which coincides with the SMA50 and Bollinger’s lower band.

USDCAD

USDCAD

 

USDJPY

The pair surged up to the psychological level of 104. This price level is the new barrier for the bulls and upon penetration of it we are looking for the next round price of 105 and 106. However, it is important to note that the resistance of 104 has been the high of the previous trend it is a hard challenge for the bulls. Moreover, by the upside penetration of this level a failure swing pattern will be completed. RSI is still on bullish territories but it is flat below the overbought level while MACD is above its equilibrium level but its trigger line is still negative. The price is still trending above and below SMA100 which is again a strong level to be broken. On the downside, the risks lay near the support of 103 and then the next valid support lies at 102.

 

USDJPY

USDJPY

 

EURUSD

Did you notice that EURUSD attempting to break the symmetrical triangle to the downside on the daily timeframe? MACD gave as an early bearish signal by crossing its equilibrium level and its signal to the downside while ADX indicates negative directional movement. The next valid support level for the pair is near 1.107 while the resistance is near 1.123.

EURUSD

EURUSD

 

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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