Forex Signals Brief December 6: Will ADP Employment Confirm the Decline in JOLTS Jobs?
Yesterday started with the Tokyo CPI inflation from Japan, which showed a decent decline in November after the jump in the previous month, removing the pressure on the Bank of Japan to tweak the monetary policy. That was followed by the Reserve Bank of Australia meeting, which held interest rates at 4.35% as expected after the 25 bps hike last month.
The Eurozone and UK services PMI were released during the European session, showing an improvement in this sector, although risk currencies continued to decline against the USD, which stretched Monday’s upward momentum further yesterday, with EUR/USD and GBP/USD on the retreat.
But, Treasury yields continued to decline, which generally signals a weaker US currency and better equities, although this was not the case yesterday. Fundamentally, the JOLTS report gave the Fed’s inflation-fighters some positive news after the decline to the lowest levels in two years and below 9 million, while the ISM services index showed improvement activity.
Today’s Market Expectations
Today started with the Q3 GDP report from Australia, which was expected to tick down to 0.3% from 0.4% in Q2 while year-on-year growth was expected at 1.7%, down from 2.1% in Q2. Westpac analysts predicted that the Q3 metrics will match the Q2 number, adding that “we estimate that Australia’s economy grew by 0.4% in the September quarter, following results of 0.4% in both March and June.” According to the desk, “the economy is stuck in slow motion, as the intense headwinds of high inflation and higher interest rates impact.” Domestic demand growth is projected to have slowed from a near 3% annualized rate in H1 to a 1.8% annualized rate in Q3.”
The ADP employment numbers will be next and although estimates of 128K new jobs in November, up from 113K previously, the market is skeptical after yesterday’s soft JOLTS job openings. The market is now focused on labor market weakness, so a positive report may cause some upside reaction to the USD, but it is likely to be reversed quickly as traders await the NFP data later in the week.
The Bank of Canada meeting is scheduled for today, which is projected to maintain interest rates at 5.00%. This decision is bolstered by recent Governor Macklem’s statements that “interest rates may now be restrictive enough” and the CPI data, in which all figures fell further, particularly for the underlying inflation metrics, on which the BoC is most interested. Furthermore, despite being positive, last week’s labor market report showed another increase in the unemployment rate.
Yesterday the forex market continued Monday’s price action with the USD pushing higher, so once again, we remained mostly long on the USD. We ended up with two winning forex signals, although we had two losing signals, as we tried to buy XAU during the retreat, but the decline continued in XAU.
GOLD Stalls at the 20 Daily SMA
Gold reached a fresh record high of over $21,45 after markets opened on Monday, buoyed by the escalation of tensions in the Middle East and Powell’s words on Friday, which traders interpreted as paving the way for a rate cut, causing the US dollar and Treasury yields to fall. But we saw a swift reversal and Gold prices dipped to $2,012 yesterday, signaling that the market’s aggressive pricing of US Federal Reserve rate cuts may have gone too far. Although the decline stopped right at the 20 SMA yesterday.
XAU/USD – Daily chart
- Gold Buy Signal
- Entry Price: $2,012
- Stop Loss: $1,998
- Take Profit: $2,022
EUR/USD Unable to Keep Gains Above 1.10
Following a rough start to the new week yesterday, the European session was risk-on, with European stock markets continuing optimistic and bond yields falling. Nonetheless, the EUR/USD remains negative, with dovish statements from ECB members adding to the weakness. The price fell below 1.08, although it stopped right at the 200 SMA (purple) on the daily chart, so let’s see if selelrs can push below that moving average today.
USD/JPY – Daily chart
Cryptocurrency Update
MAs Can’t Keep Up with BITCOIN As it Pushed Above $44,000
As risk trades increase and interest rates are predicted to decline, the crypto market and bitcoin are getting more popular. Following the Binance sanctions and the FTX debacle, the sector appears to have cleaned itself. Bitcoin gained additional ground last week, reaching $39,577. The key driver for bitcoin bulls is the formation of a US ETF, which appears to be a foregone conclusion. The only stumbling block appears to be the timing, which might occur as early as the first week of January. Over the weekend, buyers returned, pushing the price beyond $42,000.
BTC/USD – 240 minute chart
ETHEREUM Approaching our TP Target
Following some wonderful news for the digital market, Ethereum climbed more than $300 and crossed $1,800 due to the positive attitude in the cryptocurrency company. It’s amazing how the $1,700 support zone, as well as the 50 SMA (yellow), have turned into resistance. Early this month, ETH/USD surpassed $2,000, signaling that purchasers had taken control and that our previous Ethereum tip should have paid off. Over the weekend, ETH/USD surpassed $2,200, where it ended the week. The bullish momentum continues and yesterday ETH broke above $2,300 as well.
Ethereum – 240 minute chart
- ETH Buy Signal
- Entry Price: $1,947.38
- Stop Loss: $1,490
- Take Profit: $2,500
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