August’s US employment report front and center

Peter Iosif, ACA, MBA IronFX

August’s US employment report to rock the markets

Market attention today is expected to be on the US employment report for August. The release gains on attention as the Fed’s interest rate decision is nearing. Currently the NFP figure is expected to modestly recover from its drop into the negatives in July, reaching 56k, while the unemployment rate is expected to remain unchanged at 4.1%. Should the rates and figures show a wider than expected tightening of the US employment market, it could enhance market expectations for a tightening of the Fed’s monetary policy and thus provide support for the USD, while at the same time weigh on gold’s price and US equities.

Canada’s employment data to move the Loonie

Simultaneously with the US employment report, we are also getting Canada’s employment data for August. Despite BoC’s interest rate decision showing the bank’s focus on inflationary pressures, the state of the Canadian employment market given also the US-Canadian trade war remains high. Should the data show a tighter than expected employment market we may see the Loonie getting some support, while weaker than expected employment data could weigh on the CAD.

Gold’s price stabilises for now

Besides the release of the US employment report for August mentioned yesterday, we also note the Fed’s intentions as one of the main factors behind the gold’s direction today. Fed Board Governor Waller stated yesterday that he would favour the bank remaining on hold in the September meeting should US CPI rates continue to slow down easing the market’s hawkish expectations for the Fed. It’s characteristic that currently Fed Fund Futures imply that the market marginally expects the bank to remain on hold in September and proceed with only rate hike, instead of two, until the end of the year. Should we see further cooling of the market’s expectations for the Fed to tighten its monetary policy, gold’s price may be allowed to rise again.

Bitcoin defends $81.5k level

Bitcoin was on the rise again yesterday defending the $81.5k level. The crypto-market added about $112.4 billion with falling US yields and easing market expectations for a possible tightening of the Fed’s monetary policy aiding the cryptocurrency market. A possible improvement of the sentiment in the crypto-market, may allow Bitcoin and the wider crypto-market to rise further, given its risky nature.

Other highlights for today

Today we note that BoE Governor Bailey and ECB’s chief economist Lane speak, while we get Canada’s Ivey PMI for August.

Charts to keep an eye out

USD/CAD dropped yesterday aiming for the 1.3730 (S1) support line. We maintain a sideways motion bias for the time being, yet the RSI indicator remains between the readings of 50 and 30, implying a bearish predisposition of the market for the pair. Should the bears take control over the pair, we may see USD/CAD breaking the 1.3730 (S1) support line and start aiming for the 1.3550 (S2) support level. Should the bulls take over, we may see USD/CAD breaking the 1.3880 (R1) resistance line and start aiming for the 1.3990 (R2) level.

BTC/USD rose covering the distance between the 76800 (S1) support line and the 81450 (R1) resistance level. The RSI indicator remains near 70, implying a bullish market sentiment for the crypto king. Yet for the time being we maintain a bias for a sideways motion between the S1 and the R1. For a bullish outlook to emerge, we require a clear break above the 81450 (R1) resistance line and the crypto’s price to start aiming for the 86500 (R2) resistance level. For a bearish outlook to emerge, Bitcoin’s price would have to break clearly the 76800 (S1) support line and start aiming for the 72500 (S2) support level.

USD/CAD daily chart

Support: 1.3730 (S1), 1.3550 (S2), 1.3420 (S3).
Resistance: 1.3880 (R1), 1.3990 (R2), 1.4125 (R3).

BTC/USD Daily Chart

Support: 76800 (S1), 72500 (S2), 69500 (S3).
Resistance: 81450 (R1), 86500 (R2), 90500 (R3).

Author

Peter Iosif, ACA, MBA

IronFX

Mr. Iosif joined IronFX in 2017 as part of the sales force. His high level of competence and expertise enabled him to climb up the company ladder quickly and move to the IronFX Strategy team as a Research Analyst. Mr.

AUD/USD drops to two-week low, further below 0.7000 after RBA's less hawkish rate hike

AUD/USD drifts lower for the second straight day on Tuesday, hitting a fresh two-week low during the Asian session after the Reserve Bank of Australia's (RBA) widely expected 25 bps rate hike. The decision was far from unanimous, with three members preferring to hold rates at 4.60%. This tempers expectations of further tightening, which, along with modest US Dollar strength, weighs on the currency pair.

USD/JPY fails near 159.00 amid weak USD, intervention risks

USD/JPY edges lower during Tuesday’s Asian session, reversing part of the previous day's gains to 158.00 as the US Dollar remains depressed amid hopes for Iran diplomacy and ahead of US midterm elections. Meanwhile, intervention risks support the Japanese Yen, though the uncertainty over the timing of the next BoJ rate hike caps gains. This keeps the pair confined within a familiar range and warrants caution before placing directional bets.

Gold struggles below $3,950 amid Fed hike bets, ahead of US midterm elections

Gold weakens further below $3,950 during the Asian session, reversing part of the previous day's recovery from a one-year low set last week. Data released on Monday showed that US manufacturing sector business activity expanded for the 10th straight month in October. The Institute for Supply Management's Manufacturing PMI came in higher than consensus estimates and rose to 55.5 in October from 54.5 in the previous month. This reaffirms hawkish US Federal Reserve expectations, which along with rebounding US bond yields, prompt fresh selling around the non-yielding yellow metal.

Cardano extends losses as sellers stay in control

Cardano (ADA) extends correction, trading below $0.189 on Tuesday after losing key support zone the previous day. Mixed derivatives data and cautious on-chain metrics continue to weigh on bullish sentiment, while weakening technical indicators suggest further downside risks for ADA.

What a split Congress means for the US Dollar

The United States is going to the polls on Tuesday, and much is at stake. The mid-term elections mean the renovation of roughly one-third of the Senate and all 435 of the House seats. Additionally, special elections in Florida and Ohio will be held to fill the seats vacated by US Secretary of State Marco Rubio and Vice President JD Vance.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.