Forex Signals Brief December 8: NFP to Close the US Employment Week

Yesterday the economic calendar was light, so not much was expected. But, the volatility kicked in early in the Asian session, with the JPY surging higher, sending USD/JPY 300 pips lower initially, then after some consolidation, the decline resumed again and this pair fell roughly 600 pips. The decline started on BOJ governor Ueda’s hint at difficult circumstances for the Japanese economy at the end of this year, which was seen as an indication that the Bank of Japan may tweak the monetary policy at this month’s meeting.

The selloff accelerated again after the US data slate was released, and US 2-year rates fell on the day. The price fell from around 147.50 to around 144.50, before retracing and consolidating around 145 until the European session closed, when the pair stabilized for several hours. However, later during the day, we saw another push to the downside which accelerated as stop losses were triggered below 144, resulting in a swift drop below 142. Although we saw a recovery toward 144 at the end of the day.

Early in the day, the trade balance report from China was released, showing that the surplus increased, while expectations were for a decline, suggesting that the economy is recovering. That helped improve the risk sentiment, keeping commodity dollars bullish during most of the day. The US unemployment claims came close to expectations in the afternoon, so they didn’t have much impact on the market.

Today’s Market Expectations

Today is all about the US NFP numbers, which are predicted to come at 180K for November, up from 150K in the previous month. This would be welcomed by markets after an ugly miss in the last reading. However, the end of the United Auto Workers strikes in October which dragged on Manufacturing payrolls in the previous report, is expected to improve the numbers.

Average Hourly Earnings are expected to show some mixed results, with the annualized number predicted to tick down again to 4.0% from 4.1% previously, while the monthly number is expected to tick higher to 0.3% from 0.2% previously. “All signs point to an ongoing cooldown across various measures of labour market activity,” according to Moody’s Investors Service.

The UoM Consumer Sentiment Index which compares how people see their own finances, will be released in the afternoon and is projected to increase to 61.8 points this month from 61.3 points in November. The trend has been declining since summer, indicating that the US consumer is getting pressured by higher rates and inflation, with inflation expectations increasing in recent months, despite the significant decline in fuel prices.