US November employment data to shake the markets

Today we highlight the release of the US employment report for November. The release gains on importance given that the US government shutdown kept the markets largely in the dark for the state of the US employment market, while the Fed seems to maintain a data-driven approach. The Non-Farm Payrolls figure is expected to drop to 40k if compared to September’s 119, the unemployment rate to fail to drop by remaining unchanged at 4.4% and the average earnings growth rate to slow down to 3.6%yy if compared to 3.8%yy. The prognosis points towards further easing in the US employment market and should the actual rates and figures show an even deeper-than-expected cooling of the US employment market we may see release weighing on the USD as the pressure on the Fed to continue easing its monetary policy may increase. On the flip side, should the actual data show a less-than-expected easing of the US employment market, or even show a possible unexpected tightening, we may see the USD getting some substantial support as the market may be taken by surprise and be forced to ease its expectations for the Fed to cut rates further. Please note that the release may have ripple effects beyond the FX market, possibly affecting US stock markets and gold’s price, with a beyond expectations easing of the US employment market possibly supporting them.

On a technical level, we note that gold’s price stabilised yesterday, just before reaching the 4380 (R1) resistance line and corrected lower in today’s Asian session as mentioned in yesterday’s report. Given that the upward trendline guiding the precious metal’s price remains intact we maintain our bullish outlook for the precious metal. Should the bulls maintain control as expected we may see gold’s price breaking the 4380 (R1) resistance line which is an All Time High for the precious metal and set as the next possible target for the bulls the 4600 (R2) resistance hurdle. Should the bears take over we may see gold’s price breaking the 4245 (S1) support line, continuing to break also the prementioned upward trendline and reach if not breach the 4050 (S2) support level.

In the current week, the main event for EUR traders is expected to be the ECB’s interest rate decision on Thursday, yet today we note the release of Euro Zone’s preliminary PMI figures for December. The indicators are expected to provide a picture for the level of economic activity and we intend to focus on the indicators for Germany’s manufacturing sector, France’s services sector and for a rounder view the composite index of the Euro Zone as a whole. Main point of worries is the contraction of economic activity for Germany’s manufacturing sector. Overall should we see economic activity in the Zone deteriorating we may see the common currency weakening.

EUR/USD continued to edge higher yesterday aiming for the 1.1915 (R1) resistance line. We maintain a bullish outlook for the pair as long as the upward trendline guiding it since the 21st of November remains intact. Our bullish outlook is supported also by the RSI indicator which runs along the reading of 70, implying a strong bullish market sentiment for the pair, yet at the same time may imply that the pair has neared overbought levels and may be ripe for a correction lower. Should the bullish outlook be maintained we may see EUR/USD breaking the 1.1915 (R1) resistance line and paving the way for the 1.2115 (R2) resistance level. For the adoption of a bearish outlook, we would require EUR/USD to break the prementioned upward trendline in a first signal of an interruption of the upward movement, continue to break the 1.1665 (S1) support line and start actively aiming for the 1.1465 (S2) support base.

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Today, we get Euro Zone’s industrial output for October, Canada’s November House Starts, the US NY Fed manufacturing index for December and Canada’s manufacturing sales for October, while NY Fed President Williams speaks. In tomorrow’s Asian session, RBA’s Jones and Connolly are speaking.