Forex Signals Brief November 1: The NFP Unlikely to Move Markets Much

Yesterday started with retail sales from Australia which were weak but the AUD ended the day slightly higher, as the USD retreated lower. Besides that, the slight improvement in the Chinese Manufacturing and Services PMI numbers also helped the sentiment somewhat, which was mostly mixed.

The Bank of Japan held its meeting early in the day, leaving interest rates unchanged, but mentioned rate hikes, which send the Yen around 100 pips higher. 2.1% lower than last month, compared to a revised 2.3%. Employment costs for the third quarter were 0.8% for the month and 3.9% for the year, which is often a solid indicator of inflation. That is down from 4.3% in September 2023. Wages and salaries rose to 3.9% from 4.6% the previous year. Today’s initial jobless claims were higher, at 216K compared to the estimated 230K. Continuing claims fell as well, to 1.862 million vs projections of 1.885 million. The employment statistics still appear to be strong.

The major stock indices plummeted rapidly, lead by the Nasdaq, as the market reacted to Microsoft and Meta earnings (which weren’t bad, but the market didn’t hear them) and became concerned about the upcoming elections next week. ChatGPT said: ChatGPT Today’s core PCE figures matched expectations month-over-month, but due to a prior revision, the year-over-year rate came in 0.1% higher at 2.7%, unchanged from last month. Meanwhile, the headline PCE was reported at 2.1%, slightly down from a revised 2.3% last month.

For the third quarter, employment costs rose by 0.8% for the month and 3.9% year-over-year, a strong inflation indicator, though down from 4.3% in September 2023. Wages and salaries also grew, reaching 3.9% from 4.6% in the previous year. Initial jobless claims increased slightly to 216K, above the expected 230K, while continuing claims dropped to 1.862 million, under the projected 1.885 million. This suggests resilience in the employment data overall. Major stock indices, especially the Nasdaq, saw sharp declines as the market reacted to Microsoft and Meta earnings. Although earnings weren’t necessarily weak, investor sentiment turned cautious amid concerns about the upcoming elections next week.

Today’s Market Expectations

Today the Swiss CPI is expected to hold steady year-over-year at 0.8%, with a monthly forecast of 0.0%, an improvement from the previous -0.3%. Although inflation in Switzerland has remained within the Swiss National Bank’s 0-2% target for over a year, it continues to trend downward, with core inflation around 1%. The market currently sees a 27% chance of a 50 basis point rate cut in December, and a softer report could push this probability over 50%. The SNB has acknowledged the Swiss franc’s strength as a factor keeping inflation low but has yet to implement measures to address it.

In the US, the upcoming NFP report is expected to show a slowdown in job growth, with 123,000 jobs added in October versus 254,000 in September. The unemployment rate is projected to hold steady at 4.1%. Year-over-year average hourly earnings are forecasted at 4.0%, matching the prior year, while the monthly figure is expected to come in at 0.3%, down from 0.4%. This report may be challenging to interpret due to distortions from hurricanes and strikes in October, although the focus on the US election may lessen its market impact.

The US ISM Manufacturing PMI is anticipated at 47.6, a slight uptick from 47.2 previously. The New Orders index will be closely watched as it often reflects early responses to recent events. The S&P Global Manufacturing PMI saw a slight improvement, with new orders rising, though still in contraction territory. With uncertainties surrounding the US election, market sentiment remains centered on election developments, making this week’s data impactful yet secondary to political events.

Yesterday the volatility picked up eve further, with the Yen surging early in the day after the Bank of Japan statement which mentioned rate hikes, while Gold tumbled later in the day. There were also many reversals and spikes, which made it difficult to trade and we got caught on the wrong side a few times, but also picked  some nice trades. We opened 8 trading signals, 6 of which closed at the end of the day, three of were winning forex signals and three losing trades.

Gold Tumbles But the Uptrend Holds

Gold prices reached a record high of $2,790 this week, driven by weak US JOLTS job openings data and rising anticipation surrounding the upcoming US presidential elections. As the election nears, investors in stocks, bonds, and precious metals have adopted a cautious stance, often waiting on the sidelines. Despite recent gains from haven demand and central bank purchases in response to tensions in the Middle East and Ukraine, gold’s three-month rally faced profit-taking pressure, temporarily dropping to $2,730—about a 2% decline. Yet, strong support quickly emerged near $2,700, setting positive expectations for further gains in the coming months. The primary trend for gold remains bullish, and steady buying pressure suggests further potential as global economic and geopolitical uncertainties persist.

XAU/USD – H4 Chart

USD/CAD Dips and Bonces Back

In currency markets, USD/CAD has shown strong bullish movement this month, though momentum has slowed since breaching 1.38. A pullback today followed Canada’s GDP report, where August GDP was flat but an advanced September figure showed positive growth, strengthening the Canadian dollar. The unexpected strength in September lifted the CAD, causing USD/CAD to dip 30 pips below 1.38 even as the US dollar rose against other commodity-linked currencies like the NZD and AUD. However, USD/CAD buyers soon returned, pushing the rate above 1.38 once more, indicating room for further upside.

USD/CAD – Weekly Chart

Cryptocurrency Update

Bitcoin Slips Below $70K After Failing to Make New Record high

BTC/USD – Daily chart

Ethereum Finds Support at the 100 SMA

Ethereum also gained momentum, breaking above its 100-day SMA to reach $2,700 in October. Following a brief dip on Tuesday, Ethereum found support at its 50-day SMA, maintaining a position above $2,500 and showing resilience in its current upward trend.

ETH/USD – Daily chart