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US jobs data rounds off a busy week

November 05,2021 07:37:13

Overnight Headlines

*US stocks extended their streaks of record high closes to six sessions

*USD made three-week highs on a cautious BoE

*US 10-year Treasury yields fell to their lowest since mid-October

*Oil prices dropped again after OPEC+ went ahead with its planned output hike

*US non-farm payrolls key data to watch today

US equities, namely the S&P500 and Nasdaq, pushed up to more all-time highs. The Dow posted a slim loss. Growth and tech were the strong performers. Financials came under pressure as global yields fell. Asian markets are mostly lower after the MSCI world index hit a record high on Thursday. European and US futures are currently mixed ahead of the US jobs report this afternoon.

USD moved sharply higher breaking out of its recent range. Bulls have their eyes on the October high at 94.56 as bullish momentum picks up. The shock decision by the BoE not to hike rates sent GBP tumbling 1.36%. This also hit global bond yields with traders reining in rate hikes by central banks. Major cable support comes in at 1.3411. EUR made an intraday low of 1.1528 as it toys with the cycle low at 1.1524. EUR/GBP jumped higher breaking above long-term SMAs. Next resistance above is the 200-day SMA at 0.8582.

Market Thoughts – NFP Day

It’s the first Friday of the month. That means we get the monthly US jobs numbers. This is always a major event for markets, though the recent Fed meeting and tapering decision have taken away a little bit of gloss from the release (at 12.30pm UK time due to daylight saving time). Consensus sees 450k jobs growth in October versus the prior disappointing 194k. The unemployment rate is forecast to fall one tenth to 4.7%.

Labour supply issues continue to be a conundrum for economists. Even with a consensus print, payrolls will still be roughly 9.2 million beneath whether they should be, had the pre-Covid trend been maintained. However, at present there were 11 million job openings.

Seasonal factors have been an issue with recent headline prints, though wage growth has picked up. Only a shockingly low number will warn of an alarming slowdown in the labour market recovery.

Chart of the Day – DXY eyeing up resistance zone

Much will depend on the jobs report later today, but the dollar could be poised to challenge a major area of resistance. The Fed’s tapering will cut the global dollar liquidity overhang so should support more gains. Rate increases are likely to follow. This puts the Fed in the pack of central banks which are way ahead of the ECB and BoJ.

Prices broke north yesterday as the euro and pound collapsed. As well as the recent high at 94.56, the March 2020 spike low sits at 94.65. The September 2020 high at 94.74 also looms just above, along with the 200-week SMA. Any major disappointment could see the DXY slip back to 94 with support around 93.80.

Jamie DuttaAnalyst / Trader

"With extensive experience as a full time trader and financial market commentator, I have worked as a trader in top tier investment banks and trading houses, including Morgan Stanley and GAIN Capital trading Forex, Index derivatives. and Bonds. I combine technical analysis with a deep fundamental knowledge to identify trade set-ups. My real life experience allows me to break down the complexities of financial jargon and trading. This means everyone can better understand the compelling forces of greed and fear which are realised every day in countless ways across markets."

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