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Currency pair EUR/USD

Important data is being announced in the US today. The NFP figures and the unemployment rate will indicate how well the employment market is doing in the current economic environment.

EUR/USD is still building a bullish retracement within wave 4 (blue). A break below the support of the sideways zone (green) could indicate the continuation of the wave 5 (blue) within a larger wave C (purple). A break above the 61.8% Fib makes a wave 4 (blue) less likely.

The EUR/USD will most likely complete the wave 4 (blue) if price breaks below the channel (blue). In the meantime, price could retrace to deeper Fibonacci levels of wave 4 (blue) but typically should not break above the 61.8% Fibonacci level.

Currency pair GBP/USD

The GBP/USD broke the support trend lines (dotted blue) after strong bearish momentum occurred during the Bank of England rate decision. The bearish turn makes the wave 4 (green) correction more likely now and a wave 5 (green) breakout could occur soon or later this month.

The GBP/USD is showing strong bearish momentum and could be in a wave 4 (blue) of a larger wave 3 (orange).

Currency pair USD/JPY

The USD/JPY sideways pattern is most likely indicating that one more bullish push is likely towards the 115-resistance level.

The USD/JPY needs to break above the resistance trend line (red) to continue towards the Fibonacci targets at 114.50-115.

A Tokyo holiday has meant a quiet session in Asia for crude oil as it ignores overbought technical indicators.

Crude oil meandered higher in a subdued session overnight as the market awaits key U.S. employment data this afternoon. Oil was supported by rhetoric from Saudi Arabia and Iraq that OPEC compliance had been pleasing and that they supported an extension of the production cut agreement through to December 2018. Venezuela's announcement that it was attempting to restructure all of its foreign debt should continue to be price supportive as well as its almost inevitable default looms ever closer. This may cause supply disruptions from the South American country further tightening supplies.

We continue to advise caution, however. Although both Brent and WTI look constructive on the charts, the RSI's on both are at very overbought levels. This short-term indicator suggests that despite the confidence in the market, they could be vulnerable to a near-term downside correction. Possibly quite an aggressive one.

Brent Crude climbed 35 cents to close at 60.95 in New York, rising a further 15 cents to 61.10 in early Asia. Brent has a well denoted triple bottom at 60.20 which should form strong support initially. Below this, we see 60.00 and then 59.00 as the next supports. Resistance is at 62.00 with little on the charts beyond there. We assume that more selling will appear at the 63.00 area.

WTI spot climbed 50 cents to close at 54.55 in New York as U.S. exports hit record highs and have drifted 10 cents higher to 54.65 in early Asian trading. WTI has a congestion zone of a series of daily lows between 53.50 and 53.70 that will lend reasonable support initially. Below here lies the daily uptrend support line at 52.90 with a break opening a drop to 52.00. Resistance is at 55.00 with a break clearing the path to the 56.50 regions.

Gold and Silver continue attempting to base as a Tokyo holiday squashes Asian volatility ahead of tonights crucial U.S. employment data.

The aviation days of my youth featured some colourful sayings from the Air Force flight line. One of them being 'try not to buy the farm today Office Cadet Halley.' This was a charming way of saying, don't make a smoking hole in a farmers field with the government's very expensive aeroplane, we have just signed you off in to do solo aerobatics. To this day I am not sure whether my instructor was more concerned about losing the aeroplane or me, but both Gold and Silver are attempting to avoid the same fate today. This time in the shape of the Non-Farm Payrolls where a good number could see dollar strength and result in gold and silver 'buying the farm.'

Gold

Gold spiked to 1284.00 overnight as Jerome Powell was confirmed as the new Federal Reserve Chairman. The gains were short-lived though, and gold gave all of the gains back to close one dollar higher at 1276.00.

Nevertheless, gold has continued to make a series of higher lows on a daily basis as it has remained bid in Asia this week, driven by Chinese retail buying. With the Shanghai Gold Exchange arbitrage clearly at attractive levels on this interest, this has ensured that the price action in gold remains constructive from a technical perspective.

Gold closed at its 100-day moving average and initial support of 1276.00 in New York and had climbed $1.50 in early Asia trading to 1277.50, most likely on more Chinese retail buying interest. Below this, support appears at 1273.00 followed by 1263.50, the 200-day moving average at 1261.40 and then the critical 1260.00 level. This is also near to the 61.80 Fibonacci retracements with the converging of all these technical factors in one area underlining this region's importance. Resistance is at the overnight high of 1284.00 followed by the double top at 1291.50.

Gold's fate into the next week will be decided by the U.S. Non-Farm Payroll data tonight with the street expecting a monster 315,000 increase. Meeting expectations could see the dollar strengthen possibly nipping gold's recovery in the bud. Conversely, a significant miss to the downside should be supportive of gold as the dollar weakens.

Silver

Silver continues to lead gold to the upside having traded more positively over the past couple of weeks. Overall it's corrective sell-off has been much more shallow than golds. It has been attempting to base again in its long-term Fibonacci retracement box between the 38.2 and 50.0% levels whose boundaries are 16.9550 and 16.1750.

Overnight silver managed to consolidate further its gains from Wednesday, finishing unchanged at 17.0500. Today's session has been somewhat moribund with Tokyo on holiday meaning that Silver remains almost unchanged at 17.0450. We expect volatility to pick up as the Non-Farm data draws nearer in the New York session.

Silver is flirting with its 200-day moving average and initial resistance at 17.1915 which is followed by a double top at 17.2950 and then October's high of 17.4750. Nearby support is at yesterdays low of 17.0340. A break of this level implies a deeper correction to its 100-day moving average at 19.8700 and p[ossibly as far as the 16.6000 could be on the cards.

EUR/USD

Current level - 1.1659

Still no sign of a reversal and the upmove from 1.1570 is intact, imposing a risk of a brief spike to 1.1720. Trigger on the downside is 1.1600 and a violation of that low will signal, that the expected sell-off is underway, towards 1.1480.

USD/JPY

Current level - 113.98

My outlook is already bullish, for a break through 114.50, towards 115.50 zone. Initial intraday support lies at 113.50.

GBP/USD

Current level - 1.3069

The furious sell-off after MPC meeting broke through 1.3220 support, dashing all the way down to 1.3020 lows, thus showing, that a large scale move is underway, towards 1.2760. Current rebound shouldbe considered corrective, preceding a slide towards 1.2910. Initial intraday resistance lies at 1.3080, followed by 1.3150.

Sunrise Market Commentary

• Rates: Payrolls unable to give US Treasuries firm direction?
  The outcome of the payrolls is highly uncertain. We see risks for a strong report. However, a Treasury sell-off won’t trigger a relevant break of key support. Similarly, key resistance looks to tough to break in case of a weak report. We envisage a sell-on-upticks in the latter case.
• Currencies: Will payrolls be strong enough to inspire further USD gains?
  Yesterday, the formal nomination of Jerome Powell as Fed Chairman and a proposal on US tax reforms were not able to give the dollar clear directional guidance. Today, the focus is on the US payrolls. We expect a strong report. A positive surprise in average hourly earnings is probably needed to support further USD gains

The Sunrise Headlines

• US equities ended the session nearly unchanged with the Dow outperforming after recouping early losses (on tax plan). Asian shares trade mixed with Japanese markets closed for a holiday. China underperforms.
• House Republican leaders rolled out their sweeping tax plan. The proposal cuts the corporate rate to 20%, reduces the number of individual brackets and eliminates the estate tax. It also halves the cap on the popular mortgage-interest deduction on new home sales and imposes a levy of up to 12% on offshore earnings. Trump said the bill will be law by Christmas.
• Brent headed for a fourth weekly gain, with the Saudi and Russian energy ministers possibly meeting in Uzbekistan to discuss oil-output cuts. Brent trades currently at $60.86/barrel.
• Venezuela is restructuring its global debt. President Maduro said PDVSA will make one last $1.1 billion payment before negotiating with banks and investors. Risk of contagion seems limited. Mexican peso was little changed in Asia.
• Apple forecasts record sales tied to robust demand for the iPhone X. It will help generate as much as $87 bn. in the Dec. quarter. Tim Cook said production which has had problems was "going well" and initial demand is strong."
• Mr.Powell pledged to pursue the Fed's goals of stable prices and maximum unemployment while keeping an eye on financial market risks. Trump officially named him to succeed Janet Yellen as Fed chairman.
• Chinese Caixin-Markit services PMI rose to 51.2 in October, up from 50.6 previously. New business growth was modest while business expectations picked up slightly.
• The market calendar will be dominated by the US payrolls. Minor items are the UK services PMI and speeches of ECB Nowotny & Coeuré and Fed Kashkari

Currencies: Will Payrolls Be Strong Enough To Inspire Further USD Gains?

Will payrolls trigger a new USD up-leg?

The dollar showed no clear trend yesterday. Markets awaited the nomination of the new Fed chairman and the tax proposal of the GOP. Equities and the dollar dropped temporary as the first details of the tax plan hit the screens, but the decline was soon reversed. US president Trump as expected appointed Jerome Powell as Fed Chairman. In the end, both factors had only limited impact on markets. The nomination of Powell was largely discounted. The tax proposals are still subject to amendments. EUR/USD finished the session at 1.1658 (from 1.1619). USD/JPY closed the session in well-known territory just north of 114.

Overnight, Asian equities show modest gains. Tech stocks are supported by strong earnings from Apple published after the WS close. Chinese equities underperformed even as the Caixin services PMI rose from 50.6 to 51.2. Chinese authorities consider tighter rules on foreign investments. USD/JPY is little changed in the 114 area in light trading conditions (Japanese markets are closed). EUR/USD holds a tight range in the 1.1650/70 area. Yesterday’s rebound of the Aussie dollar is aborted by poor Q3 retail sales. AUD/USD returned below the 0.77 handle.

Today, the October US payrolls will dominate trading. After a hurricane-distorted September report, a strong bounce is expected. Consensus expects net payrolls’ growth of 323K. We side with the consensus and expected a strong figure. The unemployment rate is expected stable at 4.2%. Average Hourly Earnings are probably the most important element of the report. A moderate 0.2% M/M gain is expected. That would slow the Y/Y advance to 2.7% from 2.9%. We see the risks on the upside. Other US eco data (trade deficit, ISM, factory orders) will be only of second tier importance.

The dollar was in better shape at the end of last week, but the rebound slowed this week. The publication of a tax proposal and the nomination of Powell as Fed Chairman were not able to break the stalemate. If the payrolls (especially AHE) are strong, the dollar might try a new up-leg. However, recent price action showed that there is little room for disappointment.

LT we maintain a EUR/USD sell-on-upticks bias. Of late, the dollar failed to gain against the euro despite widening interest rate differentials since early September. This trading dynamic was broken after the ECB decision last week. Policy divergence between the ECB and the Fed is again on the radar. However, any additional rate support for the dollar will probably be modest near term. So, further EUR/USD decline might develop gradually

From a technical point of view, EUR/USD dropped below 1.1670/62 support, but there are no convincing follow-through gains yet. If the break is confirmed, it would signal that the recent EUR/USD uptrend is broken. EUR/USD 1.1423 (38% retracement of 2017 rise) is the next downside target on the charts. USD/JPY’s momentum was positive in September. The pair regained 110.67/95 resistance, a positive. The 114.49 correction top is the next resistance. Sentiment improved last week, but the first test on Friday failed. We don’t preposition for a sustained break higher.

EUR/USD broke below 1.1662 support, but breaks still needs to be confirmed

EUR/GBP

Sterling tumbles on soft BoE assessment

Yesterday, the BoE voted 7-2 to raise the base rate by 0.25 bp. However, the policy assessment was very dovish. The BOE assumes that inflation will return close to 2% by the end of the 3-year forecasting horizon. In order to meet the target, only two additional rate hikes are pencilled in. So, this scenario only sees very limited interest rate support for sterling medium term. EUR/GBP jumped from the low 0.88 area to 0.89 area and closed the session at 0.8927. Cable also fell off a cliff and finished the session at 1.3059 (from 1.3245).

Today, the UK services PMI will be published. A small decline from 53.6 to 53.2 is expected. This would confirm the picture that the UK economy has entered an era of lower growth. Markets will also monitor the consequences of the reshuffles within the UK government. More political instability will undermine confidence in the UK government and in sterling. In a day-to-day perspective, the decline of sterling might slow after yesterday’s sell-off. However, sterling remains vulnerable to negative eco and political news which is still highly likely to reoccur.

EUR/GBP staged a strong uptrend from April till late August with a top at 0.9307. Rising UK inflation and the BoE preparing markets for a rate hike caused a sterling rebound. This rebound did run into resistance. EUR/GBP tried to regain the 0.89/90 area, but there were no follow-through gains. EUR/GBP retested the 0.8743 support earlier this week, but rebound sharply yesterday. We maintain the view that the 0.8733 -0.8652 support area will be though to break in a sustainable way. A EUR/GBBOP buy-on-dips approach is favoured. 0.9023/33 is the first important resistance for the EUR/GBP cross rate

EUR/GBP: rebounds off 0.8733/43 support on soft BoE policy assessment

Download entire Sunrise Market Commentary

In line with market expectations, the Bank of England raised the UK base rate to 0.5% (from 0.25%) on Thursday. The rise, the first in 10 years, was widely expected as the UK has seen inflation well above the Bank of England’s target rate of 2.0% (3.0% in September), with Governor Carney stating “The pace at which the economy can grow without generating inflationary pressures has fallen relative to pre-crisis norms. This reflects persistent weakness in productivity growth since the crisis and, more recently, the more limited availability of labour.” Whilst the rate hike was already “priced-in” by the markets, GBP suffered losses of 1.8% against EUR and 1.5% against USD following the announcement. Many attribute the downward pressure on GBP because of Governor Carney hinting that rates would rise twice more in the next 3 years, with rates edging up to 1% by the end of 2020. The future pace of rate rises is exceptionally slow and it is based on a relatively gloomy growth outlook which resulted in the markets selling GBP against its peers.

To no surprise, President Trump nominated Jerome Powell as the next Federal Reserve Chairman on Thursday at the White House. Trump stated: “He’s strong, he’s committed, he’s smart” and “I am confident that with Jay as a wise steward of the Federal Reserve, it will have the leadership it needs in the years to come.” The position requires Senate confirmation, but Mr. Powell is likely to get broad support from the Republican Senate majority. The Fed is expected to raise its benchmark interest rate again in December, likely Ms. Yellen’s final act as Fed Chair. Under Mr. Powell’s leadership, the Fed will likely continue its projected path of raising its interest rate 3 more times next year, as well as continuing to pare back its massive Fixed Income portfolio.

The markets are now focused on today’s Nonfarm Payrolls report for October, scheduled to be released at 12:30 GMT. Market expectations for a strong number were recently re-enforced with the ADP National Report showing the US private sector hired 235K workers in October, the most in 8 months.

EURUSD is little changed in early Friday trading at around 1.1665.

USDJPY is currently trading around 113.96.

GBPUSD, after a significant drop on Thursday, appears to be holding steady in early session trading at around 1.3075.

Gold is unchanged overnight, currently trading around $1,277.

WTI is 0.16% higher in early Friday trading at around $54.95.

Major data releases for today:

At 12:30 GMT, the US Department of Labor will release Nonfarm Payrolls for October. Market consensus is expected to show that the US economy added 310K jobs in October. In September, the economy shed jobs for the first time in 7 years, following disruptions from Hurricanes Harvey & Irma. NFP never fails to cause general market volatility, and this release will be no different, with expected volatility regardless of the number released.

At 12:30 GMT, US average hourly earnings (MoM & YoY) for October will be released. The annualized rate rose to 2.9% in September, demonstrating the fastest pace of growth in 8 years. This pace is expected to slow down to 2.7% year-on-year in October and 0.3% month-on-month from September’s 0.5%.

At 12:30 GMT, and to round off the set of impactful data releases from the US, will be US Unemployment rate. Forecasts are calling for the rate to remain unchanged at 4.2% – any deviation from expectation will cause a spike in USD volatility.

At 12:30 GMT, Statistics Canada is scheduled to release Unemployment rate and the Net Change in Employment for October. The Unemployment rate is expected to come in unchanged at 6.2%, with the net change forecast at 15K, an increase from the previous reading of 10K. Expect CAD volatility following the releases.

USDJPY (114.00): The USDJPY continues to trade near the major resistance level of 114.31 - 114.00 region. The sideways price action could signal a major breakout in the near term. On the 4-hour chart, we notice the inverse head and shoulders continuation pattern taking shape. Neckline resistance is formed at 114.24 which could be breached in the short term. This could put the upside bias in USDJPY towards 115.00 in the near term. However, failure to breakout above 114.24 resistance could mean that USDJPY will maintain the sideways range in the near term.

EURGBP (0.8920): The EURGBP posted a strong rebound yesterday as price rallied to a 4-day high. With price action breaking past the 0.8867 - 0.8850 minor resistance level we expect further upside gains to continue. In the near term, any declines are likely to be supported near 0.8867 - 0.8850 price level that could turn to support. In such a case, the next upside target in EURGBP will be near 0.9016 level which was previously tested. While the bias remains to the upside, EURGBP could be seen moving back into a range if price falls below 0.8850 support. This could keep the sideways price action intact and will see the EURGBP testing the lower support near 0.8778

EURUSD (1.1657): The consolidation in the EURUSD continues as price action remains trading flat below 1.1672. The euro was seen posting modest gains, but did not manage to make any significant progress. With price trading below the main resistance level of 1.1704 and 1.1672 we expect the bias to remain to the downside. On the 4-hour chart, the bearish flag pattern remains the main point of focus. Price action is expected to break down to the downside and will be validated on a close below the previous low of 1.1573. This will open the downside target in EURUSD towards 1.1411 eventually marking the completion of the bearish flag pattern. To the upside, a breakout above 1.1704 - 1.1672 could however signal a shift in the short-term direction.

The Bank of England hiked interest rates in a widely expected move, raising the rates by 25 basis points. The BOE Governor advised that rate hikes will be gradual. Yesterday's rate hike was the first in a decade. The dovish forward guidance saw the British pound weakening strongly. GBPUSD fell 1.4% on the day while the EURGBP rose 1.8%. It was one of the strongest declines in the British pound in a year.

In the US President Trump officially nominated Fed member, Jerome Powell to be the next central bank chair. Powell was one of the main contenders for the post. However, markets view Powell as a cautious dove, but he is expected to continue to push ahead with the current monetary policy course.

Looking ahead the October payrolls report will be coming out today. According to the economists polled, the US economy is seen adding +300k jobs as normalcy returns. Revisions to September's payrolls data could also be weighing on investors as data showed a decline in jobs during the September month. The average hourly earnings are expected to rise 0.2% while the US unemployment is expected to remain steady at 4.2%.