All eyes on US jobs data

The softer-than-expected July US JOLTS job openings data served as the primary macro driver on Wednesday, weighing on the US dollar (USD) and sending US Treasury yields lower (bull flattening), as markets now fully price in a 25-basis-point (bp) cut this month from the US Federal Reserve (Fed). 

Across major US equity indices, the S&P 500 rose 0.5% to 6,448, the Nasdaq 100 advanced 0.8% to 23,414, while the Dow Jones Industrial Average declined 0.1% to 45,271. For any technical analysts reading, check out the daily charts of the S&P 500 and the Nasdaq, which are demonstrating clear-cut morning star candlestick formations (bullish signals).

Out of the commodities space, Spot Gold (XAU/USD) continued to shine yesterday, reaching another record high of US$3,578. However, the yellow metal has pared most of those gains in early trading this morning. Oil markets, however, took a sizeable hit on Wednesday, down more than 2.0% amid concerns that OPEC+ could boost supply again, raising concerns about a potential supply glut.

Labour market dynamics reinforce a cooling narrative

The latest JOLTS report revealed that approximately 7.18 million listings were posted, down from 7.40 million in June and below the expected 7.38 million. The healthcare and social assistance sectors bore the brunt of the slowdown, shedding 181,000 positions. 

Beyond the 7.10 million print in September 2024, this reading represents the weakest employment backdrop since early 2021, reinforcing the narrative that corporate America has adopted a more vigilant approach in their hiring processes. This also bolsters the cooling jobs market story as we head into Friday’s August non-farm payrolls report.

Dovish undertones gain traction

The downside across USD/yields was also aided by Fed officials sounding a supportive tone regarding rate cuts, citing concerns over the deteriorating jobs market. This included Fed Governor Christopher Waller, whose name is firmly in the hat to replace Fed Chair Jerome Powell in May next year. Waller noted that he has been ‘clear’ that the Fed ‘should be cutting at the next meeting’, and added: ‘When the labour market turns bad, it turns bad fast’. 

Adding to the Fed’s dynamics, Stephen Miran’s Senate confirmation hearing is scheduled today. Miran is set to replace the recently departed Fed Governor Adriana Kugler. As I have said in numerous posts, if Miran is confirmed and Fed Governor Lisa Cook resigns, this would result in a ‘dovish majority’ of members on the Board. While it will still take a 12-member majority to influence the target rate, the 7 Fed Governors establish the discount rate and have control over the reappointments of the 12 regional Fed bank presidents, which could prove interesting as that approaches next year!

Day ahead

On the docket today, US data is front and centre again, with the majority of the focus directed on the jobs market. August ADP non-farm employment change is up at 12:15 pm GMT (Exp: 65k; Prev: 104k), initial jobless claims for the week ending 30 August at 12:30 pm (Exp: 230k; Prev: 229k), as well as the August ISM services PMI at 2:00 pm (Exp: 51.0; Prev: 50.1). I have added the LSEG calendar below, which provides the maximum/minimum estimate range for the noted data.

LSEG data

Should today’s jobs data also come in weaker-than-expected, USD downside is likely on the table. An interesting daily chart I am watching closely right now is the USD/JPY (US dollar versus the Japanese yen), with the pair recently fading the underside of its 200-day simple moving average at ¥148.83 and completing an AB=CD bearish pattern at ¥149.16. With the 38.2% Fibonacci retracement ratio of ¥147.96 already reached, the AB=CD bearish formation may be complete, and the price may venture higher. Consequently, with the pair now essentially drifting between the SMA and the AB=CD’s initial downside target, I will closely watch these edges during today’s data, as a breakout could open the door to strategic scalping opportunities.