Forex Signals Brief September 5: More US Jobs Data Before the NFP

Yesterday the day started with the GDP report from Australia, which showed a 0.2% for July, but on a yearly basis, it continued to move lower, falling to 1.0% in Q2 after the decline to 1.1% in Q1. As a result, the Australian Dollar tumbled 30 pips lower during the Asian session, but AUD/USD ended the day higher nonetheless on the back of returned USD weakness.

The Bank of Canada lowered interest rates by 25 basis points, bringing the rate down to 4.25% from 4.5%. While this move was largely expected, there was some anticipation for a more aggressive 50 basis point cut. However, the USD/CAD moved lower, indicating strength in the Canadian dollar, despite the rate reduction, as the focus of the day was elsewhere.

The JOLTS job report in the US revealed signs of employment weakness, with job openings decreasing. This brought the ratio of job openings per available worker to just under 1.1, a sharp decline from the peak of more than 2-to-1 seen in early 2022. The tightening labor market is leading to less slack, suggesting that conditions are continuing to soften.

Today’s Market Expectations

Today we have more employment reports from the US, which will give further clues to tomorrow’s NFP report. The US Jobless Claims report continues to be one of the most crucial weekly indicators for gauging the current state of the labor market, offering timely insights. Since 2022, initial claims have consistently ranged between 200K-260K, while continuing claims have been gradually increasing. This suggests that while layoffs remain low, hiring activity has moderated. For this week, Initial Claims are expected at 230K, slightly down from last week’s 231K, and Continuing Claims are forecasted at 1,865K, marginally lower than the previous week’s 1,868K.

In addition to jobless claims, the US ISM Services PMI is projected to come in at 51.1, slightly down from 51.4 previously. The ISM Services PMI has lacked clarity, fluctuating since 2022, but its employment sub-index will likely be in the spotlight ahead of the Non-Farm Payrolls (NFP) report. The latest S&P Global Services PMI hinted at continued growth in the services sector, while economic activity in Q3 remains divided between the Manufacturing and Services sectors

Yesterday we had rough start to the week as the price action was irrational, despite the price action being mostly slow, with the USD gaining on some fronts, while losing against other assets. We opened 7 trading signals in total, ending with one winning forex signa and three losing trades, however, we will make up during the week.

Gold Makes Lower Highs

Gold dropped to a low of $2,470 yesterday, testing a significant support and resistance zone. It retested that level today, rallying for a second time, driven by heightened geopolitical tensions in the Middle East and growing expectations of a 50 basis point rate cut by the Federal Reserve due to weak job growth figures. However, a stronger US dollar has restricted gold’s upward momentum, keeping it below key resistance levels. On the H4 chart, we initiated a sell trade at the 50 SMA (yellow), anticipating a continuation of the bearish trend that started last week. While the trade was on track, a move above the 50 SMA, triggered by weak US job data, disrupted our plan. Still, the upward move faced resistance at the 100 SMA (red), and the price is now reversing. We are maintaining our sell position as the pattern of lower highs suggests the short-term trend remains bearish.

XAU/USD – H1 chart

Trying the Upside in USD/CHF

In the USD/CHF pair, the price fell more than 6 cents to 0.84 over the past two months, but a strong bullish reversal late last week pushed the pair above 0.85, gaining more than 1 cent. The return of USD buyers has been a key factor in this bullish momentum since mid-last week. However, with expectations of a 50 basis point rate cut by the Federal Reserve this month, the USD has been losing steam. After today’s JOLTS job openings report, USD/CHF dropped by approximately 40 pips. Despite this decline, the price remains above the 50 SMA (yellow) on the H4 chart, which has served as support since USD/CHF broke above it last week.

USD/CHF – Daily H4

Cryptocurrency Update

Bitcoin Holds Above Resistance 

BTC/USD – Daily chart

Ethereum Consolidates Below $2,500

Ethereum has been trending downwards since March, marked by a series of lower highs suggesting more losses could be on the horizon for August. After a sharp decline from $3,830 to below $3,000, Ethereum saw a brief recovery in June, moving above the 50-day SMA. However, persistent selling pressure led to another drop, pushing the price below the 200-day SMA before it bounced back to around $2,600. Currently, buyers are testing the 20-day SMA, indicating a likely clash between bulls and bears over the market’s direction. The outcome of this battle over the 20-day SMA is expected to be a key factor in determining whether Ethereum can sustain a long-term recovery or if the bearish trend will persist.

ETH/USD – Daily chart