• October data suggest that Payrolls will miss big in October.
  • Dollar bulls still licking their wounds post-Fed as a rate hike seems far away.
  • EUR/USD holding at the upper end of October range, scope to test 1.1250.

The US will release October employment data this Friday, and signs ahead of it are not good. The Nonfarm Payroll report is expected to show that the country has added 85K new jobs in the month, below the previous  136K. The unemployment rate is seen ticking higher from 3.5% to 3.6%, while average hourly earnings are seen up by 0.3% monthly basis and by 3.o% when compared to a year earlier.  

Leading indicators providing negative signals

The market anticipates a weak outcome as correlated data has missed the market’s expectations.  According to the latest release, Continuing Jobless Claims are up by 1.69M, while the Challenger Job Cuts showed that US-based employers announced job cuts of 50,275 in October, 20.97% higher than the 41,557 announced in the previous month.  

The ADP survey on private employment creation, came in slightly above expected, with 125K new positions added, although the September figure was downwardly revised to 93K.

Given that the Nonfarm Payroll report will be released in the first trading day of the month, no hints are coming from ISM, which will release the official Manufacturing PMI after the employment report.

 

US jobs report pre-release checklist – Nov 1st, 2019

 
Previous Non-Farm Payrolls Negative Headline number at 136k disappointed, showing a smaller increase than expected (145k).
Challenger Job Cuts Negative The number of corporate layoffs went up in October, as it 50.275K job cuts (41.557K in September). This indicator has been ranging on the 35K-55K for the last five months.
Initial Jobless Claims Neutral The number of people filing first-time claims for unemployment insurance is showing minimal variations, stuck between 200K and 220K for the last eleven weeks.
Continuing Jobless Claims Neutral The amount of people receiving unemployment benefits is stuck between 1.65M and 1.7M, very close to all-time lows.
ISM Non-Manufacturing PMI Negative Employment Index in the very-important US services survey came out at 50.4 in September, a much smaller figure than the 53.1 level seen in August.
ISM Manufacturing PMI Negative Employment sub-component in the ISM Manufacturing PMI disappointed for the second month in a row, printing a modest 46.3, way into contraction territory.
University of Michigan Consumer Confidence Index Neutral UMich consumer survey regained the 95 mark in October, but is still below the highs seen from May in . 
Conference Board Consumer Confidence Index Negative CB consumer survey showed a small retracement from 126.3 to 125.9, also failing to match the expectations, which were forecasting a surge to the 128 mark.
ADP Employment Report Neutral The US private employment report slightly beat estimates with a 125K job addition in October, but September figure was revised down to 93K. It's still a slowdown.
JOLTS Job Openings Negative Job openings fell below expectations in August, printing 7.051 million labor vacancies, the fourth consecutive month with a fall in the number.

Dollar’s possible reaction to different scenarios

Despite being priced in, a worse-than-expected report would likely have a larger impact on the dollar’s price than an encouraging one, as speculative interest has been affected by the latest Fed’s monetary policy announcement. Chief Powell words, hinting a pause in rate cuts but also suggesting that a rate hike is far away in the horizon, have hurt dollar’s bulls which are still licking their wounds.

The greenback’s decline will be more notable against safe-haven rivals such as the yen and gold, and commodity-linked currencies, particularly if equities extend their slumps. The Pound moves mostly on Brexit-related headlines, and GBP/USD reaction to the report is usually meaningless.

EUR/USD possible behaviour

The EUR/USD pair is trading at the upper end of its October range, and while losing ground this Thursday, far from signalling a steeper decline ahead. Daily basis, the pair is far above a bullish 20 DMA, also above a bearish 100 DMA, while technical indicators lose strength upward but remain within positive levels.

Overall, the risk is skewed to the upside as long as the pair remains above the 1.1100 level, with a break below it exposing firstly 1.1065, and later the 1.1000 figure. Beyond 1.1180, on the other hand, the next possible bullish target is 1.1250, followed by the 1.1300 price zone.


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