EUR/USD, WTI crude oil tread water ahead of NFP: European open – 06/09/2023

Asian Indices:

• Australia's ASX 200 index rose by 35 points (0.51%) and currently trades at 6,960.50
• Japan's Nikkei 225 index has fallen by 0.44 points (0%) and currently trades at 31,075.80
• Hong Kong's Hang Seng index has risen by 312.21 points (1.81%) and currently trades at 17,526.08
• China's A50 Index has fallen by -72.69 points (-0.58%) and currently trades at 12,398.05

 

UK and Europe:

• UK's FTSE 100 futures are currently up 28.5 points (0.38%), the cash market is currently estimated to open at 7,480.04
• Euro STOXX 50 futures are currently up 16 points (0.39%), the cash market is currently estimated to open at 4,115.81
• Germany's DAX futures are currently up 58 points (0.38%), the cash market is currently estimated to open at 15,128.22

 

US Futures:

• DJI futures are currently down -10 points (-0.03%)
• S&P 500 futures are currently down -2 points (-0.05%)
• Nasdaq 100 futures are currently up 3.75 points (0.03%)

 

 

Events in focus (GMT+1):

• 23:30 – Nonfarm payroll
• 23:30 – Canadian employment report

 

It has been an action-packed week for markets, which has meant that price action ahead of today’s nonfarm payroll report has been quieter than usual. Looking through the numbers, consensus expectations have pencilled in a slightly cooler labour market – but not by any worrying degree. Job growth is expected to cool to 170k from 187k, private payrolls down to 160k from 179k, whilst average hourly earnings are forecast to remain steady at 34.4hrs and the unemployment rate pull back to 3.7% from 3.8%. These numbers hardly ring alarm bells and we’re going to need to see some large deviations away from these headline figures to get volatility pumping.

Take note that the Canadian employment report is released alongside NFP at 13:30 BST, but unless we see a clear divergence between US and Canada’s figures then it likely results in choppy and difficult trading conditions for USD/CAD.

• European futures are higher ahead of the cash market open
• Forex ranges were razor thin during the Asian session, and their 1-day implied volatility levels have not exactly blown out either
• We’re keeping a close eye to see if gold can turn higher from the support level above $1800
• AUD/JPY has caught our eye for a potential swing trade short if sentiment sours once more (yes yields… we’re looking your way)

 

 

EUR/USD technical analysis (1-hour chart):

The weaker US dollar allowed the euro to rise for a second day, in line with yesterday’s bias. Although it didn’t quite reach the upside targets around 1.0560. But that’s not to say it can’t, with a nonfarm payroll report pending.

The upper 1-day implied volatility band sits right near the weekly pivot point, volume node and bearish trendline, which makes the 1.05670 area of interest. Perhaps prices could drift higher today ahead of the report, in which case a strong NFP report could weigh on the euro and tempt bears for a move towards (and potentially below) 1.0500. Also note the bearish RSI divergence forming to show a weakness to the current 2-day rally and prices are forming a potential rising wedge (which isa bearish pattern within a downtrend).

But if it can break above the resistance area, then perhaps we’re looking at a move beyond 1.0600 next week.

 

WTI crude oil technical analysis (daily chart):

It has been a brutal week for oil prices, with WTI crude oil having fallen nearly 14% in just five days. It saw a clear close beneath the January and April highs, and if we’re to be ‘treated’ to a weak nonfarm payrolls report oil could continue lower on the renewed concerns of a recession (which tend to dent the demand outlook for oil prices). Should bears maintain control, $80 is the next major levels for bulls to defend, near the 200-day EMA.

With that said, RSI (2) is trying to curl its way higher from the oversold level to suggest oil prices could be approaching a near-term, inflection point.

  

WTI crude oil technical analysis (1-hour chart):

The 1-hour chart shows that volatility has picked up near the cycle lows, which is not something you typically see after a strong move (as volatility usually diminishes). If anything is to be gleaned from that information, it could be that there’s a bit of a battle around these lows and prices are refusing to go immediately lower.

And with the RSI (14) forming a bullish divergence, I don’t think an initial move towards $85 sounds so crazy, near the weekly R2 pivot level. At which point I’d reconsider its potential to extends its move higher, or form a swing high and head towards $80.

 

 

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge