The re-strengthening of the dollar and the bull run on indices has been put on pause this morning amid caution in front of the crucial US jobs report. Although there is a slight element of risk aversion that is creeping in, we do not expect any trending moves to form. Nonfarm Payrolls will likely drive an increase in trading volatility later. 

Today’s news

  • Main drivers: Sentiment traditionally cautious ahead of payrolls; dovish RBA keeps Aussie under downside pressure; Oil volatility; Nonfarm Payrolls later.
  • Cautious early trading: Markets are traditionally cautious in the European session ahead of Nonfarm Payrolls, and today is no exception. Little direction on forex or indices.
  • Dovish RBA monetary policy statement: The Reserve Bank of Australia noted a commitment to maintaining highly supportive monetary conditions. It reiterated patience and that a first-rate hike remains likely in 2024. [AUD negative]
  • Oil volatility after OPEC+ sticks at 400,000 production increase: OPEC+ has chosen to maintain the current monthly increase of 400,000 barrels per day, as expected. Despite this, rising production in Suadi Arabia (back above 10 million bpd). Iran is also working towards a position where US sanctions can be lifted, which would mean an increase in Iran oil production [Oil volatile still]
  • Central bank speakers: No FOMC speakers due today.
  • Economic Data:

      Nonfarm Payrolls at 1230GMT is expected to improve to 425,000 (from 194,000 in September). Also, Unemployment is expected to improve to 4.7% (4.8% in September) with Average Hourly Earnings increasing to 4.9% (from 4.7% in September).

      Canada unemployment at 1230GMT expected to improve slightly to 6.8% (from 6.9%)

Markets Outlook

  • Broad outlook: Cautious markets mixed with a slight element of risk aversion. USD mixed to slightly positive, indices are consolidating recent gains, commodities mildly higher, oil volatile.
  • Forex: USD consolidating in its recent re-strengthening outlook. GBP and AUD negative.

       EUR/USD has dropped towards a test of 1.1525 key support but is holding ground early today. A strong payrolls report could prove decisive for a downside break. We favor short positions for a move below 1.1525 and towards 1.13/1.14.

       GBP/USD big downside pressure added to by the Bank of England decision. Down again today, looking towards a test of 1.3410 key support. A breach opens 1.31/1.32 next key support.

       AUD/USD downside momentum growing, Old support at 0.7450/0.7475 is growing as new resistance, Below support around 0.7375 opens 0.7320. 

  • Commodities: precious metals rebounding into resistance, oil volatile

       Gold is neutral between $1750/60 support and $1800/$1810 resistance. A rebound is nearing $1800 again, but once more is showing signs of backing away. Strong payrolls would be gold negative. It is difficult to have a high conviction view whilst these levels remain intact.

       Silver a rebound into resistance around 23.75/24.00 again. Above $24.10 improves, but we are cautious ahead of payrolls.

      Brent Crude oil near-term volatility continues. Back under $82.40 turns the outlook more corrective again. Rallies are increasingly being sold into.

  • Indices: more all-time highs on Wall Street, but consolidation across indices ahead of payrolls. We are increasingly mindful of near-term profit-taking.

      S&P 500 futures are still very strong but the concern is that there could be some near-term profit-taking with the daily RSI so stretched above 70. Initial support 4550/4590. We look to buy into near-term weakness. 

      DAX Consolidating back from a new all-time high of 16,064. We prefer to buy into weakness. Good support 15,755/15,845.

     FTSE 100 looking strong on a breakout this morning. Any unwind towards 7215/7246 support is a chance to buy for the medium-term bullish breakout targeting 7700.