Eyes on the US jobs report

Eyes on the US Jobs Report – During yesterday’s session, US equities failed to rally and closed slightly lower. The Dow Jones lost about 0.54%, while the S&P500 closed down by 0.3%. However, Nasdaq closed the day unchanged. On the other hand, the US 10-year yield closed yesterday’s trading at the lowest level since June 2023.

US economic releases had mixed outcomes yesterday. However, overall, it’s safe to say that the labor market is showing more signs of cooling. The ADP Non-Farm Employment Change came in at 99K, well below the estimated 145K. The prior reading has been revised down to 111K from 122K.

On the positive side, Jobless Claims decreased slightly to 227K from 232K, and Continuing Claims also decreased to 1838K from 1860K the previous week.

The Services PMI was the main focus, coming in slightly higher at 51.5 in August, up from 51.4. However, the Employment component is concerning, declining to 50.2 from 51.1, more than the 50.5 estimated.

Today’s Data

The US jobs report is the most significant event of this week, coming two weeks before the Federal Reserve’s September meeting, where the first rate cut is expected to occur.

Currently, the Fed Funds Futures indicate a 40% likelihood of a 0.50% interest rate cut by the Federal Reserve in September. At the beginning of this week, the probability was less than 30%. The impact of today’s data on the Fed Funds Futures will depend on any surprises the report may bring.

Despite the focus on the number of new jobs created, there might be more concern about the Unemployment Rate. The recent revision removing 800K jobs raises questions about the credibility of the NFP. Even if the NFP beats expectations today, if the unemployment rate increases, it will have a greater impact on the markets.

DXY below 101.0

The US Dollar Index is experiencing downward pressure after yesterday’s data. The decline persisted during the Asian and European sessions today, dropping to as low as 100.80 at the time of this report. However, the technical indicators are still far from oversold territory, suggesting the possibility of another decrease towards the 100.60 support area, especially if the NFP report brings negative news.

The bearish outlook remains unchanged as long as the index trades below 102.0. If it breaks the key support at 100.60, the bearish outlook would be reinforced, possibly leading to a decline towards 100.0 and then 99.30 in the coming weeks.

USDJPY near Aug 5 low

USDJPY has declined for the fourth consecutive trading day, reaching as low as 142.15 today, nearing its August 5 low at 141.71. The technical indicators remain bearish on most timeframes and are still far from oversold territory, which raises the possibility of a break below the August 5 low in the coming hours or days.

On the upside view, for the time being, the break below the 144.0 support area has now turned into a solid resistance. Any upside retracement is likely to remain capped below that level for now.

Gold near record high

Gold once again managed to hold above the $2478 support area for the third time since August 22 before bouncing back to as high as $2520 during yesterday’s trading, nearing its record high of $2530. The technical indicators remain bullish on most timeframes, which keeps the possibility of another leg higher to either retest the record high or set a new one.

Today’s data could trigger such a move, particularly if the US jobs report contains negative surprises. The next significant resistance levels after reaching a record high are at $2550 and $2580, where Gold is expected to face strong resistance for a while.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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