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It’s the first Friday of September that means that the United States will release labor market data for August at 15:30 MT time. This week has already been very volatile for EUR/USD and USD/JPY. Will the news release change anything?
The risks
Yes, there are no doubts that this release will have a big impact on the market as it’s the last one before the Federal Reserve’s September meeting.
ADP employment report, which is the same as NFP, except it’s prepared not by the authorities, but by a private entity, showed that 237K jobs were created in America last month compared to 185K expected. After this publication, many market players started thinking that NFP will come out strong as well. Remember though that ADP and NFP don’t always correlate.
History shows that August payrolls tend to disappoint the market. The reasons for such consistent pattern are not quite clear. It may have something to do with seasonal factors: American teachers quit jobs and are re-employed when the new school year starts. August is also a holiday season. Many people who do contract work don't take new assignments. There are also some tricky reasons to believe that wage growth (average hourly earnings) will be lower as well (this deals with the fact how the indicator is counted).
The Fed is closely watching the US economic figures as traders try to predict further actions of the US central bank. The devastating hurricane that ran over Texas diminishes the odds of the Fed’s rate hike this year (although the hurricane won’t affect this month’s NFP). A disappointment in labor data will make the US currency suffer a lot. At the same time, USD bulls will need a reading above the consensus forecast to continue the greenback’s recovery.
The forecasts
Here are the forecasts of some well-known banks.
The impact
>200K – very USD-positive
180K-200K – mildly positive for the USD
150K-180K – mildly negative for the USD
<150 – very USD-negative
EUR/USD: PULLBACK FROM 1/8 MM LEVEL
12:44 01.09.2017
We've got a pullback from 1/8 MM Level, so wave [a] has been ended. However, wave 4 is likely going to be continued. So, if a pullback from 2/8 MM Level happens afterwards, we could have another bearish impulse in wave [c] of 4.
There's a bearish impulse in wave [a]. Also, bulls delivered a small bullish impulse in wave (a), so wave [b] is likely going to take the form of a zigzag. The main intraday target is 4/8 MM Level, which could be a departure point for wave [c] of 4.
There's a bullish "Harami", which has been confirmed by the last "Three Methods". So, the market is likely going to rise towards the nearest resistance in the short term. If a pullback from this level happens, we could have another decline.
We've got a confirmed "Doji" at the local low, so the pair is likely going to test the upper "Window" during the day. However, if we have a bearish pattern little later on, bears will probably try to test the Moving Averages once again.
USD/JPY: BEARS GOING TO PUSH PRICE LOWER
14:33 01.09.2017
There's a "Shooting Star", which has been formed on the 144 Moving Average. Also, there's a local bullish "Harami", so the market is likely going to test the nearest resistance, which could be a departure point for a decline toward the lower "Window".
We've got bullish patterns such a "Tweezers" and a "High Wave", but both of them have a quite week confirmation. Therefore, if a pullback from the upper "Window" happens, bears are likely going to push the price lower.
The US dollar index (DXY) dipped to 91.55 before recovering to 93.30 area, but the descending trend line didn’t let the greenback to push higher and it reserved back to the downside.
The fundamental picture for the US currency looks rather grim. Geopolitical tensions increased as North Korea launched a missile that flew over Japan on Tuesday and Trump’s Administration ordered to close 3 Russian diplomatic facilities in the United States. On the domestic front, hurricane Harvey may be the most expensive natural disaster in US history. According to the weather forecaster AccuWeather, it will cost the economy about $190 billion. No big announcement on the US tax reform came from Donald Trump. Finally, US labor market figures for August brought a big disappointment. America created only 156K jobs vs. 180K expected. The unemployment rate increased to 4.4% and monthly wage growth slowed down to 0.1%.
Other data from the US turned out to be mixed. American economy performed better than expected in the second quarter, as preliminary GDP growth was revised from the initial estimate of 2.6% to 3.0%. However, inflation keeps hovering at low levels – this may pose an obstacle to the Fed’s rate hikes this year. Consumer spending rose slightly less than expected in July, but consumer confidence came out strong.
US banks will be closed on Monday as the nation will celebrate Labor Day. All in all, the week will be lighter on the data front. Pay attention to ISM services PMI on Wednesday and unemployment claims and crude oil inventories on Thursday.
American currency remains within a downtrend. Declines below 92.00 (50-month MA) and 2016 low at 91.88 will bring DXY to 2015 low at 90.70. The greenback needs to return above 93.00 to reverse this trend and get a chance to rise to 94.00.
EUR/USD: OUTLOOK FOR SEPTEMBER 4-8
17:18 01.09.2017
The single currency had an extremely volatile week. EUR/USD made a spike to 1.2070, then fell to 1.1820 and then made another spike to the levels close to 1.2000 before returning below 1.1900.
The euro made bullish swings on good data from the euro area and the US dollar’s weakness. European inflation gathered pace in August. CPI increased by 1.5% exceeding analysts’ forecasts. At the same time, the acceleration was mainly because of higher oils prices as core CPI, which excludes energy and food prices, maintained the same pace.
Disappointing US labor data on Friday pushed the euro higher, but the euro bulls were stopped by a report from Bloomberg, citing unnamed euro zone officials, that the ECB may not be ready to finalize their decision on next year’s QE program until December.
Traders are looking forward to the European Central Bank’s meeting on Thursday, September 7. Only a few analysts expect the ECB to announce a timeline for its withdrawal in bond purchase plans. At his speech in Jackson Hole in August, the ECB President Mario Draghi said that “a significant degree of monetary accommodation” was still warranted. Instead, the market’s focus will be on the regulator’s comments on the euro’s strength. Minutes of the regulator’s most recent meeting showed some officials were concerned about this. Yet, some of the ECB members have made hawkish comments recently.
EUR/USD is still within the general uptrend. A weekly close below 1.1900 may set the ground for further correction to the downside. The 200-week MA at 1.1750 should act as support ahead of 1.1700. The level of 1.2000 represents a key psychological level. The pair’s inability to close above it on Tuesday together with daily MACD divergence points at the necessity to visit support levels. In addition, pay attention to the fact that EUR/USD ran into the Ichimoku Cloud and 50-period MA at the monthly chart – these things create resistance.
The US economic calendar is going to be light. Take into account our technical analysis considerations and prepare for volatility during the ECB meeting & press conference.
The main trend is still bullish, but the price faced resistance at 1.1959, so we've got a "Thorn" pattern, which pushed the market to the 34 Moving Average. In this case, we should keep an eye on the nearest support area at 1.1827 - 1.1801 as an intraday target. If a pullback from these levels happens, we could have an upward price movement towards the closest resistance at 1.1909 - 1.1959.
Bears faced support at 1.1847, so the price is consolidating. However, the pair is likely going to test the next support at 1.1827 - 1.1822. If so, we could have a new local low soon. Meanwhile, there's an opportunity to have a bullish price movement towards the nearest resistance at 1.1892 - 1.1909 afterwards.
GBP/USD: BULLS GOING TO BREAK THE LAST HIGH
10:10 04.09.2017
Bulls found resistance at 1.2985, so we've got a "V-Top" pattern, which has been confirmed. If the 89 Moving Average acts as support, the price is likely going to test another resistance at 1.2989. If a pullback from this level happens, bears will probably try to test the nearest support at 1.2932 - 1.2891.
There's a "V-Top" pattern, which pushed the price to the closest support at 1.2936. Nevertheless, bulls are likely going to break the last high during the day. If the market doesn't fixate above 1.2989 - 1.2994, there'll be an opportunity to have a decline in the direction of the next support at 1.2932 - 1.2916.
EUR/USD: MARKET GOING TO TEST 55 MA AGAIN
10:27 04.09.2017
The 34 & 55 Moving Averages have acted as support, so we've got bullish patterns such a "Harami" and an "Inverted Hammer". However, confirmation of these patterns is quite weak, so the market is likely going to test the 55 MA once again.
The price is consolidating near the last "Window". Also, there are a "Harami" and a "High Wave" patterns. Therefore, the pair is likely going to test the nearest resistance, which could be a departure point for an intraday decline.
There's a new "Window", but we still don't have any reversal pattern. So, the price is likely going to continue falling down towards the lower "Window". If any bullish pattern arrives later on, there'll be an opportunity to have a bullish price movement.
The last pullbacks from the upper "Window" led to form a new local low. It's likely that the market is going to test the nearest support, which could be a departure point for an upward correction.
