Key factor currently driving the FX market:
- NFPs picked up in October, overshooting the median consensus.
Major currencies showed mixed dynamics heading into the weekend. The strongest gains against the US dollar were shown by the Japanese yen (+0.52%), the Swiss franc (+0.34%) and the euro (+0.06%). On the other side of the FX spectrum, the Australian dollar (-1.59%), the British pound (-1.38%), the New Zealand dollar (-0.72%) and the Canadian dollar (-0.60%) posted losses.
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The EURUSD pair rose 0.12% to 1.1568 On Friday, November 5. During the first half of the day, the single currency declined to 1.1513, then climbed to an intraday high of 1.1573 later in the session.
The euro came under pressure during the European session after the release of regional macro data. In September, Eurozone retail sales fell 0.3% MoM after rising 1% in August (vs. +0.2% forecast). Further details of the release showed that retail sales were down 0.2%. On an annual basis, the calendar-adjusted retail sales index rose 2.5% in the Eurozone and 3.2% in the EU.
The US economy added 531,000 new jobs in October, surpassing the median forecast of 450,000. The August reading was upwardly revised from 366,000 to 473,000, and the September print from 194,000 to 312,000. The overall revision amounted to 235,000. The unemployment rate in October decreased from 4.8% to 4.6% compared to the forecast of 4.7%. The employment report includes only people who are actively looking for work.
Average hourly earnings rose to $30.96 from $30.85 in the previous month, up 0.4% (vs. +0.4% forecast). In annual terms, the average hourly wage increased by 4.9%, in line with the forecast.
The dollar strengthened after the NFP report, but selling soon broke out as investors opted for profit-taking ahead of the weekend. The dollar had been strengthening since the beginning of the week, so the market managed to factor in this upbeat labor market report.
Late Friday night, the US House of Representatives passed a bipartisan infrastructure bill. The Senate approved a bill to restart transportation, utilities and broadband in August. A second bill (worth about $1.75 trln) on taxes and spending has yet to be passed.
Today’s macro agenda (GMT+3)
- 16:10 EU: ECB Exective Board member Philip Lane speech
- 17:00 US: FOMC member Richard Clarida speech
- 18:30 US: Fed Chair Jerome Powell speech
- 18:55 US: FOMC member John Williams speech
- 20:00 UK/US: BoE Andrew Bailey and FOMC member Michelle Bowman speeches
- 21:50 US: FOMC member Charles Evans
Current outlook
Major currencies have been showing mixed performance in Asian trading. Antipodeans and the Canadian dollar have been trading in positive territory. EURUSD has been consolidating around the 1.1563 level. Today the economic calendar is an empty slate, but there are many speakers, including Fed Chair Powell and BoE Governor Bailey. ECB President Lagarde is scheduled to speak on Tuesday.
Technical analysis
EURUSD has stabilized at 1.1560. Resistance is at 1.1575 (trendline from 1.1690). On Friday, the dollar was under pressure from the declining UST10 yield. On Monday, it rose to 1.469%. If the fall in UST10 accelerates, the drop in the DXY index will also pick up. The DXY is currently hovering at 94.26. Support is located at 94.12.
Buyers met with resistance at the 45-degree angle of the Gann fan. They can safely climb to the 67-degree angle at 1.1593 within any corrective movement. However, if they fail to breach 1.1575, we can expect a decline to 1.1540 (pushback against growth from 1.1513 to 1.1573). Market participants will now be looking ahead to the Fed meeting to be held on December 14-15.
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