EUROPEAN FX UPDATE: Varied trade but tentative tone across FX as traders gear up for US jobs

Analysis details (09:47)

DXY

• The Dollar remains within a tight range in the run-up to the day’s highlight - the US jobs report ahead of next week’s FOMC confab. DXY notched an APAC range of 103.43-80 after price action for the Buck was largely dictated by the recent ongoings in the JPY amid hawkish bets stacking up on the BoJ’s exit from NIRP.


• In terms of today’s NFP, the consensus looks for +180k nonfarm payrolls to be added to the US economy in November (prev. 150k); while that would be an acceleration in the rate of job additions vs October, it would still be cooler than recent averages (3-month average 204k, 6-month 206k, 12-month 243k). The unemployment rate is seen unchanged at 3.9% (Fed forecasts made in September pencilled in 3.8% by end-2023, and 4.1% by end-2024). Average hourly earnings are expected to rise +0.3% M/M, but the annual rate is seen easing to 4.0% Y/Y from 4.1% in the October headline (Full Newsquawk preview available in the Research Suite).


• Looking at technicals, DXY found overnight support at its 10 DMA (103.43) and resistance near its 21 DMA (103.83), having moved back above its 200 DMA (103.55), whilst yesterday’s range was between 103.25-104.20. The weekly low was set on Monday at 103.12 whilst the peak was set on Wednesday at 104.23.

JPY

• The Yen has come off recent highs with USD/JPY back on a 144.00 handle at the time of writing (vs yesterday’s 141.70 trough). “The size of the drop in USD/JPY [yesterday] and the volatile intraday price-action are a clear consequence of the heavy short positioning on the yen into this round of hawkish speculation on Japanese rates”, said the desk at ING. Some of the hawkish speculations were tempered overnight amid downgrades to Japanese Q3 GDP metrics (Q/Q: -0.7% vs. exp. -0.5%; Y/Y -2.9% vs exp. -2.0%).


• USD/JPY came off worse levels in Europe just before 09:00 GMT in price action which coincided with the publication of Reuters sources which suggested the recent softness in consumption has presented itself as a source of concern for BoJ policymakers who are "eyeing" an exit from easy policy – adding that there was no intention by Governor Ueda to signal "anything about the timing of a policy change". Aside from that, news flow has been light as all attention turns to the US jobs report.


• Technicians would be aware that the pair found overnight support at the half-round figure of 142.50 after briefly dipping under its 200 DMA yesterday (at 142.32 today), whilst market contacts flag 145.07 as a major resistance level. Above that, there is little of note until yesterday’s 147.31 peak. Notable USD/JPY option expiries include 145.00 (USD 1.2bln), 145.45-50 (USD 832mln), and 146.00 (USD 1.2bln).

EUR, GBP

• Both are modestly softer intraday but with little in terms of catalysts. EUR/USD and GBP/USD largely move in tandem with the Buck awaiting impetus from the US jobs report. There is little to update from a macro standpoint. Analysts at ING flag two points regarding the bearish EUR momentum: 1) The bearish momentum in EUR is largely driven by the dovish repricing of ECB rate expectations. 2) The short-term EUR-USD interest rate differential suggests that the EUR should be trading lower against the USD. The desk also notes that “What has likely prevented a further EUR/USD drop has been resilient risk sentiment”.


• EUR/USD remains contained between its 200 DMA (1.0821) and 100 DMA (1.0762) after briefly breaching both levels yesterday with some also noting support at 1.0732 – which marks the 50% fib of the 1.0448-1.1017 rise. OpEx today is plentiful for the pair once again, highlights include 1.0700 (EUR 1bln), 1.0750 (EUR 1.9bln), 1.0785-90 (EUR 824mln), 1.0800 (EUR 1.6bln), 1.0815-25 (EUR 867mln), 1.0845-50 (EUR 1.4bln), 1.0900 (EUR 1.5bln).


• For Sterling, it’s been a quiet morning with just the Bank of England/Ipsos Inflation Attitudes Survey released, in which the median expectations of the rate of inflation over the coming year were 3.3%, down from 3.6% in August 2023. GBP/USD remains within yesterday’s 1.2541-2612 range after finding resistance at 1.2600 whilst EUR/GBP is contained to recent parameters in an 0.8561-85 intraday band.

AUD, NZD, CAD

• Antipodeans are mixed with the AUD and CAD narrowly outperforming amid the strength in oil and base metals whilst the NZD sits as the G10 laggard – although with no obvious catalyst aside from AUD/NZD flows. AUD/USD trades within a narrow 0.6593-6619 range and remains north of the round figure, while USD/CAD trades on either side of its 100 DMA (1.3581). NZD/USD fell from a 0.6174 to a 0.6140 low whilst AUD/NZD reclaimed a 1.0700 handle from a 1.0692 low and eyes 1.0750 to the upside. Next up, all eyes are on the US jobs data.

08 Dec 2023 - 09:53- Research Sheet- Source: Newsquawk