Anticipation Builds in Global Markets Before Key US Jobs Data Release (09.06.2024)

As global markets remain on edge, the forex landscape is marked by cautious trading ahead of crucial US employment data. The dollar, balancing near recent lows, reflects investor hesitancy while the EUR/USD steadies, reflecting subdued activity before the jobs report potentially triggers more aggressive Fed rate cuts. Similarly, the yen strengthens on domestic wage growth amidst BOJ rate hike expectations, contrasting with the Fed's easing trajectory. Gold positions for potential gains, anticipating shifts in Fed policy could enhance its appeal. Meanwhile, GBP/USD benefits from USD weakness, and silver trades cautiously, each sensitive to the imminent Nonfarm Payrolls outcomes which could dictate short-term market directions and central bank responses.

EUR/USD Trades Cautiously Ahead of Key US Employment Data

On Friday, the dollar index was around 101 and the EUR/USD pair was near 1.1115, both approaching their lowest levels in a week as investors anticipated the release of the August jobs report. This report could reinforce expectations for a substantial 50 basis point rate cut by the Federal Reserve this month. Meanwhile, the EUR/USD pair struggled to build on recent gains, trading within a narrow range during the Asian session. Prices remained above 1.1100, showing minimal change as traders held off on new positions ahead of the US Nonfarm Payrolls (NFP) report. The dollar index is poised to drop nearly 1% this week, influenced by weak US economic data that has heightened recession fears and led to expectations of more aggressive Fed rate cuts. Recent figures showed the smallest increase in US private sector jobs since January 2021, although weekly jobless claims fell more than expected. Additionally, July saw job openings drop to their lowest level in three years, while manufacturing activity in August contracted more than expected. Currently, markets are pricing in a 40% chance of a 50 basis point rate cut this month, with over 100 basis points of total easing expected for the year. Later today, European growth data will be crucial ahead of next week's anticipated ECB rate cut decision.

In the pair, the first support level is at 1.1100. If this level is breached, the next supports to watch will be 1.1045 and 1.1000. On the upside, the first resistance is at 1.1150; if this level is surpassed, the next targets will be 1.1200 and 1.1250.

Yen Strengthens as BOJ Considers Further Rate Increases

The Japanese yen strengthened to around 143 per dollar, reaching a one-month high as expectations mount that the Bank of Japan will raise interest rates further due to persistent inflation and rising wages.

Earlier this week, data showed that real wages in Japan rose for the second consecutive month in July, increasing by 0.4% compared to the same month last year, while total cash earnings grew by 3.6%. Despite this, household spending in July was lower than anticipated. BOJ officials have signaled that they may further adjust monetary policy if their economic and inflation forecasts are met, with markets anticipating another rate hike in December. In contrast, the US Federal Reserve is widely expected to begin cutting interest rates this month due to growing labor market concerns and broader economic weakness.

From a technical perspective, the first resistance level is at 143.40. If this level is surpassed, the next targets will be 144.40 and 145.00. On the downside, the initial support is at 142.80; if this level is breached, the next supports to watch will be 142.40 and 141.50.

Gold Positions for Gains with Pending US Economic Data

Gold held steady near $2,520 per ounce on Friday, close to one-week highs as traders awaited the highly anticipated US jobs report. This report could bolster expectations for a significant interest rate cut by the Federal Reserve. Lower interest rates might reduce the opportunity cost of holding non-yielding gold. Recent data highlighted a weakening labor market, with the ADP reporting that US private sector hiring in August was the lowest in 3.5 years. This, combined with a notable drop in US job openings for July and subdued manufacturing activity, has raised concerns about the US economy and increased expectations for a substantial 50 basis point rate cut this month. However, an unexpected rise in the ISM Services PMI, fueled by higher new orders and prices, eased some worries. Despite this, markets are currently pricing in a 41% chance of a 50 basis point cut and have upped their bets on a total of 125 basis points in cuts for the year. As a result, gold is poised to advance over the week.

Technically the first support level is at 2,4500. If this level is breached, the next supports to watch will be 2,470 and 2,430. On the upside, the initial resistance is at 2,530; if this level is surpassed, the next targets will be 2,550 and 2,585.

GBP/USD Benefits from USD Decline Ahead of Nonfarm Payrolls Report

The GBP/USD pair remained in positive territory around 1.3180 on Friday, benefiting from ongoing US Dollar (USD) weakness. The market is keenly awaiting the August Nonfarm Payrolls (NFP) data, which will be set for release later in the day. Thursday's ADP report showed the slowest private sector job growth in over three and a half years, with just 99,000 jobs added in August, falling short of forecasts. This data heightens expectations for a Federal Reserve rate cut at its September 17-18 meeting. However, the Pound Sterling (GBP) is supported by expectations for modest Bank of England (BoE) rate cuts. BoE Governor Andrew Bailey has signaled that while inflation pressures might be easing, any further rate cuts will be cautious. The market anticipates a rate cut in November, with a 25% chance priced in for the September meeting.

For GBP/USD, the initial support lies at 1.3150, followed by 1.3100 and 1.3050 below. On the upside, the first resistance is at 1.3190, with subsequent levels at 1.3265 and 1.3300 if the pair breaks above this resistance.

Silver Trades Cautiously Ahead of US Nonfarm Payrolls Report

Silver (XAG/USD) trades within a narrow range around $28.80 during the Asian session on Friday, staying below the weekly peak reached the previous day. Traders appear hesitant, preferring to await the critical US Nonfarm Payrolls (NFP) report before making new directional moves.

From technical perspective, the first resistance level to watch is at 29.20. If silver breaks above this level, the next resistance levels to watch will be 30.00 and 30.50, respectively. On the downside, the initial support level is at 28.50, with subsequent support levels at 28.05 and 27.80.