Forex Signals Brief October 4: Can the NFP Keep the USD Up?

Yesterday the day started with the Swiss CPI inflation report, which showed a 0.3% decline in September, further putting pressure on the Swiss National Bank to reduce interest rates. That kept the CHF down throughout the day, with USD/CHF heading for the top of the range, helped by USD demand and markets turning away from safe havens such as the CHF.

But, following a cautious statement from BoE Governor Andrew Bailey, the British pound dropped by 2 cents, intensifying the selling pressure on GBP and overtaking the CHF as the weakest currency. Meanwhile, oil prices surged by around $3 after President Biden revealed that the US was discussing the possibility of Israel targeting Iran’s oil infrastructure.

On the other hand, the US dollar continued to strengthen, driven by a robust ISM services report, which hit its highest level since February 2023. However, the employment index in the report dipped below 50 points, signaling potential weakness ahead of tomorrow’s non-farm payrolls data. Commodity currencies were hit by risk aversion, but stock markets remained resilient. Optimistic comments from Nvidia helped fuel gains in the AI sector, contributing to the market’s stability despite broader geopolitical tensions.

Today’s Market Expectations

Today we have the UK Construction PMI data in the European session, which expected to shoo a slight slowdown for September, while the Italian Retail Sales are expected to slow to 0.2% from 0.5% in August. In the US session, we have the Canadian Ivey PMI, which is expected to jump by 2 points and leave behind contraction, although that’s wouldn’t help the CAD much.

The US Non-Farm Payroll (NFP) report for September is expected to show the addition of 140,000 new jobs, slightly below August’s figure of 142,000. The unemployment rate is anticipated to remain steady at 4.2%. Average Hourly Earnings are projected to rise 0.3% on a monthly basis, down from 0.4%, with year-over-year growth holding at 3.8%. The Federal Reserve has forecasted a 4.4% unemployment rate by the end of 2024, alongside 50 basis points of monetary easing. Recent jobless claims data have reflected an increase in labor supply, rather than more layoffs, as the main driver of the rising unemployment rate. Currently, markets are pricing in a 53% chance of a 50 basis point rate cut by the Fed in November. If the upcoming NFP report falls short of expectations, this probability may increase. Conversely, stronger-than-expected labor market data could lead to a smaller 25 basis point rate reduction.

Yesterday the volatility was low again apart from the GBP pairs, and the USD continued the upside momentum after the positive ISM Services data. We remained bullish on the USD and traded both sides in Gold, since it was bouncing in a range. We had another positive day with our forex signals. We had 10 closed trading signals, 7 of which edned up as winning forex signals.

The Trading Range Tightens for Gold

Gold prices have surged in 2024 due to rising political, geopolitical, and economic uncertainties, maintaining strong demand for safe-haven assets. After peaking at $2,685 last Thursday, gold fell to $2,624 by Monday. Despite the dip, the 50 SMA (yellow) on the H4 chart provided solid support. Escalating Middle East tensions, including Israeli soldiers entering Lebanon and an Iranian missile strike, briefly pushed XAU/USD higher, though it failed to reach a new peak and fell during the European session. However, the 50 SMA support encouraged traders to reopen buy positions for gold.

XAU/USD – H4 chart

GBP/USD Falling Below the 200 SMA Again

GBP/USD had been strong since June but reversed sharply in October, dropping over 3 cents due to the Bank of England’s dovish shift. The pair surged above 1.34 last week as the USD weakened, but hawkish remarks from Fed Chair Jerome Powell caused a pullback, which was intensified by BoE Governor Andrew Bailey’s comments, resulting in a 200-pip plunge. The BoE’s decision to keep interest rates unchanged initially supported the pound, propelling GBP/USD to 1.3434, the highest since February 2022, but Bailey’s hints at potential rate cuts reversed the gains.

EUR/USD – H4 Chart

Cryptocurrency Update

Bitcoin Falls to $60,000 on Risk Aversion

BTC/USD – Daily chart

Ethereum Returns Below $2,500 

Similarly, Ethereum has been in decline since March, falling from $3,830 to below $3,000 by June. Persistent selling pressure drove prices down to $2,200 before briefly recovering above the 50-day moving average. The 100-week SMA is providing strong support, preventing ETH/USD from breaking below $2,500, while the 50 SMA now acts as resistance.

ETH/USD – Weekly chart