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NFP Preview - Jobs market on the turnaround?

Luke Suddards
Research Strategist
4 Nov 2021
Can NFPs push the rates market further with a strong set of numbers? Found out what you need to know below.

ADP numbers out yesterday indicates employment data may have turned a corner and is set to rebound in the months to follow (as long as covid doesn’t ramp up again). We’ll have to wait for the official data tomorrow given ADP’s historical track record for predicting NFPs, but Wednesday’s numbers soared past expectations of 400k, printing at 571k. NFPs are forecast to come in at 450k. Jobless claims data was also a good omen for tomorrow with both initial and continuing claims better than expected.

After the Fed’s meeting last night the bar for interest rate lift-off involves further improvements in the labour market. I think where we’ll see a market reaction would be solid job gains above expectations as well as the average hourly earnings number which will feed through into inflation expectations. Both of these figures could ignite more aggressive rates pricing. Powell didn’t pushback against current market pricing at the FOMC meeting. Additionally, there was a change in language from the Fed last night, subtle, but noticeable. They stated expected to be transitory with regards to inflation as opposed to just transitory which to me says they see some risks to the upside for inflation. This is why average hourly earnings could be key tomorrow.

I’ll do a quick scan of the charts of key assets which could see price volatility.

Dollar Index (DXY):


(Source: TradingView - Past performance is not indicative of future performance.)

The dollar has regained its post FOMC losses and found support at the 93.818 level as well as 21-day EMA. The RSI is trying to break above its range resistance of 55. Targets wise, to the upside I'd look towards 94.5 where there is some overhead resistance as well as near the October highs. On the downside look towards the 93.8 support and below there the 50-day SMA comes back into play.



(Source: TradingView - Past performance is not indicative of future performance.)

EURUSD found sellers at the key 1.16 resistance level as well as the 21-day EMA. 1.155 support is now very near. A breach of that would open the trap door to 1.15. The RSI has rolled over from the 52 level. Targets - 1.16 on the upside and 1.155-1.152/0 on the downside.



(Source: TradingView - Past performance is not indicative of future performance.)

USDJPY continues to be trapped within the 113.5-114.5 mini range. The RSI is still above the 58 level which served as resistance previously and has room to run before worries of overbought creep in. For now dips should be supported by the 21-day EMA and mini range support around 113.5 area. Targets, on the upside monitor 114-114.5.



(Source: TradingView - Past performance is not indicative of future performance.)

$1800 seems to be the hurdle for gold to clear. With a confluence of moving averages all bunched together - it's hard to get a read on price directionality. Price is right on the 200-day SMA which could apply some pressure. The RSI is also sniffing around the 55 level just below 60 where previous price rallies stalled. Targets to monitor - upside $1800-1830, downside - $1775-50.

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