Forex Today: Dollar weakens further ahead of NFP

It's NFP Day. During the Asian session, Australia will report Q3 Retail Sales. Also due is the China Caixin Service PMI. Later in the day, Eurostat will report the Unemployment Rate. The US and Canada will release their employment reports.

Here is what you need to know on Friday, November 3:

On Thursday, the US Dollar lost ground, extending the weakness that began after Federal Reserve Chair Jerome Powell's press conference on Wednesday. The decline has been gradual and it stopped on Thursday when many currency pairs approached critical levels.

Economic data from the US released on Thursday showed that Initial Jobless Claims rose to the highest level in seven weeks, while Continuing Claims reached the highest since April. In another report, the Unit Labor Cost during the third quarter dropped by 0.8%, contrary to expectations of a modest increase. These figures did not support the US Dollar, although it stabilised during the American session.

On Friday, the critical report will be the US official employment report. Nonfarm Payrolls are expected to show an increase of 180,000 jobs, with the Unemployment Rate remaining at 3.8%. Later, the ISM Service PMI will be released.

NFP Preview: Forecasts from nine major banks, employment remains fairly healthy

The US Dollar index reached a weekly low but then trimmed its losses, ending the day above 106.00. It maintains a bearish bias, although the negative momentum eased. The 10-year Treasury yield closed at 4.66%, the lowest level since October 13.

EUR/USD rose and closed above 1.0600, but once again, the upside was limited by the 55-day Simple Moving Average (SMA) near 1.0665. The short-term bias is skewed to the upside, but there is a lack of conviction.

The Bank of England (BoE) kept its rate unchanged at 5.25%, with a 6-3 vote. The Pound initially strengthened due to an upward revision to inflation forecasts but later retreated. EUR/GBP rose to monthly highs but then pulled back to 0.8700, erasing its gains. GBP/USD posted its highest close in more than a week above 1.2200.

The improvement in risk sentiment, higher crude oil prices, and a weaker Dollar pushed USD/CAD sharply lower. The pair tumbled from 1.3850 to 1.3745, experiencing its worst day in months. The Canadian Dollar outperformed. On Friday, Canada will release its jobs report, with a positive net change in employment expected at 22,500.

Analysts at TD Securities on Canada jobs:

We look for job growth to slow to 25k in October, slightly below the 6m trend and in line with the market consensus, as the unemployment rate edges higher to 5.6% and wage growth ticks lower to 5.2% y/y. This would give the Bank of Canada some additional evidence that higher rates are working to rebalance the economy but will not be enough to change their broader assessment of labour market conditions or the balance of risks going forward.

AUD/USD posted the highest daily close in months above 0.6400, but it finished far from the daily high it reached at 0.6455. The pair maintains a bullish bias. 

Gold moved sideways throughout the day, hovering around $1,985, while Silver dropped to $22.70, erasing Wednesday's gains.