Forex Signals Brief September 6: Mind A Soft August NFP Reading!

Yesterday market jitters intensified ahead of the US non-farm payrolls (NFP) release, leading to volatile swings without a clear direction, with the US data also showing mixed outcomes. Initially, the US dollar weakened in response to the disappointing ADP employment report, but later regained ground as services PMIs highlighted this part of the economy is still performing well.

On Thursday, the dollar softened as bond yields dropped to their lowest levels of the year, signaling a potential shift from disinflation to risk-averse, pushing traders toward flight to0 safety. Lower yields applied downward pressure on the US dollar, with GOLD heading toward record highs, while USD/JPY fell below the 143.00 mark.

Meanwhile, Oil gave the bearish bias confirmation, particularly after it failed to move higher following OPEC’s announcement to delay any production ramp-up until December. The $2 rally in crude prices fizzled out and WTI crude fell below $70 again, which is a negative signal for Oil prices, but offers positive news for bond markets and the Federal Reserve.

Today’s Market Expectations

The Canadian employment report data is expected to show an increase of 25,000 jobs in August, a rebound from the -2.8K jobs lost in July, with the unemployment rate predicted to rise slightly to 6.5% from 6.4%. Despite this, the market is not expected to pay much attention to the Canadian report since it will be released at the same time as the highly anticipated US Non-Farm Payrolls (NFP) report.

The US NFP is projected to show 165K jobs added in August, up from 114K in July, with the unemployment rate expected to dip to 4.2% from 4.3%. Year-over-year average hourly earnings are forecasted to increase to 3.7%, slightly up from the previous 3.6%, while the month-over-month figure is expected to rise to 0.3% from 0.2%. Last month’s US labor market report fell short of expectations across all metrics, leading to a sell-off in risk assets that began with the ISM Manufacturing PMI report the day before. The household survey also revealed that 436,000 people were unable to work due to severe weather caused by Hurricane Beryl in July, the largest figure on record for that month. Additionally, there were 249,000 temporary layoffs last month.

Yesterday we made a comeback regarding the forex signals, leaning short on the USD, as the retreat continued after a number of weak employment reports. We opened 7 trading signals in total, ending with five winning forex signal in total and one losing trade.

Gold Makes Lower Highs

Earlier this week, gold dropped to a low of $2,070 but found solid support at the 20-day SMA (gray) on the daily chart. Two hammer candlesticks, signaling a potential reversal, prompted buyers to return on Wednesday, pushing the price back above $2,520. This second surge was primarily driven by expectations of a 50 basis point rate cut by the Federal Reserve, fueled by weak job data. Gold’s decline below $2,500 this week erased much of the strong buying momentum seen in August. The fall paused near the 20-day SMA before rebounding midweek, as buyers sought to reignite the bullish trend. However, the recovery has stalled below last month’s high, and traders are now shifting focus to the upcoming August US Non-Farm Payrolls report, after a string of disappointing labor data.

XAU/USD – Daily 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.

EUR/USD – Daily Chart

Cryptocurrency Update

Bitcoin Falls Below Support

BTC/USD – Daily chart

The 20 Daily SMA Turns Into Resistance for Ethereum

Ethereum has been in a downward trend since March, with a series of lower highs hinting at potential further losses. After a sharp drop from $3,830 to below $3,000, Ethereum briefly rebounded in June, surpassing the 50-day SMA. However, persistent selling pressure triggered another decline, driving the price below the 200-day SMA before recovering to around $2,600. Currently, sellers remain in control, with the 20-day SMA acting as resistance on the daily chart.

ETH/USD – Daily chart