USD Continued To Be Soft Ahead Of The US Employment Report Release

Dec 03 21, 10:46 GMT

The USD continued to be weak yesterday, against a number of its counterparts ahead of the release of the US employment report for November. Overall, the expectations for the key metrics of the report are showing a tightening of the US employment market as the NFP figure is forecasted to rise, the unemployment rate to tick down and average earnings to accelerate their growth. Should the actual rates and figures meet their respective forecasts, we may see the USD getting some support as it would imply that the US employment market tightened, easing the Fed’s worries. Also, an acceleration of the average earnings growth rate could imply further inflationary pressures within the US economy and overall good readings could prompt the Fed to accelerate the pace of its monetary policy tightening by expediting the pace of the tapering of its QE program and hike rates in an earlier date. Yet we would also note the release today of the ISM non-manufacturing PMI figure for November as well as October’s US factory orders, while on a more fundamental level we note that the market’s worries about the Omicron variant of the pandemic tend to ease yet uncertainty is still present.

USD/JPY seems to have stabilised in a sideways motion above the 112.75 (S1) support line. For the time being though we maintain a bias for a sideways motion and for it to change in favour of a bearish outlook we would require a clear breaking of the 112.75 (S1) line. Please note that the RSI indicator below our 4-hour chart is nearing the reading of 50 implying a rather undecisive market. Should the bears a take charge of the pair’s direction we may see it breaking the 112.75 (S1) support line and aim for the 112.10 (S2) level. Should the bulls take over, we may see the pair aiming if not breaking the 113.70 (R1) resistance line.

TRY continues to weaken as CPI rates are due out

TRY continued to weaken against the USD yesterday despite CBT’s intervention in the markets for the first time in 7 years on Wednesday. Turkish President Erdogan doubled down on his intention to keep rates low on Wednesday and fired his finance minister, replacing him with a supporter of low rates as per media. The CBT chief is reported to have signaled yesterday that the bank is to halt its monetary policy easing in January after one more rate cut this month, while the Turkish President is intensifying efforts to enhance foreign investments in Turkey, with both factors set out to support the Lira. Also please note that the net FX reserves of CBT are on a downtrend since the start of the month and the trade deficit widens for Turkey which could imply that CBT’s ammunition to support the Lira once again in the markets is running out and Turkey may have a hard time sourcing hard currency. Today we highlight the release of Novembers’ CPI rates which are expected to accelerate past the psychological limit of 20% and if so theoretically the Lira should get some support, yet given CBT’s unwillingness to hike rates we may see the Lira weakening further.

USD/TRY continued to rise yesterday aiming for the 13.8500 (R1) resistance line. We maintain a bullish outlook for the pair as long as it remains above the upward trendline currently guiding it. Please note that the RSI indicator below our 4-hour chart is at the reading of 70 which on the one hand confirms the bullish sentiment for the pair yet may warn that USD/TRY approaches overbought conditions. Should the bulls actually maintain control over the pair we may see it breaking the 13.8500 (R1) resistance line and aim for the 14.2000 (R2) level. Should the bears take over, we may see the pair breaking the prementioned upward trendline, the 13.5000 (S1) support line and aim for lower grounds.

Other highlights today and during tomorrow’s Asian session

Besides the financial releases allready mentioned we would also note the release of Canada’s employment data for November at the same time with US employment report. Should the actual rates and figures meet their respective forecasts, we may see the CAD getting some support.

USD/JPY H4 Chart