LABOR MARKET IN THE US MISSES FORECASTS
Volatility level spiked today following the release of the labor market report in the US. The unemployment rate increased in August by 0.1% to 4.4% and the number of non-farm payrolls increased by only 156,000 against anticipated expansion of 180,000. The pace of improvement in the labor market remains strong despite some slowdown, but the main disappointment came from the data on wage growth which showed an increase of just 0.1% in the previous month, twice worse than expected. Today’s disappointing data release reduces the possibility of another rate hike by the Fed for 2017. As a result, we see the fall of the common currency against the American dollar after confident growth throughout the day thanks to strong manufacturing PMI in the Eurozone, that remained at the 57.4 level.
The British pound increased after the release of positive news from the manufacturing PMI in the UK that in August reached 56.9 compared to the average forecasted figure of 55.0. However, growth potential is still restrained by the lack of progress in the Brexit talks.
The demand for the yen is growing despite some easing in tensions linked to the recent launch of North Korean missiles. The news about the fall of manufacturing PMI in Japan to 52.2 in August which is 0.6 less than in July had little influence on market sentiment. The greenback’s weakening is stimulating bears to sell USD/JPY. At the end of the trading session, we may see fixing of positions ahead of the long weekend in the US.
After a sharp rise in volatility, the EUR/USD quotes resumed to fall and reached the ascending support line. Its breaking and overcoming the important 1.1825 mark may become a signal for the change of the local rising trend to positive with potential targets at 1.1750 and 1.1620. In case of a price rebound from the support line, the immediate goal will be at 1.1900.
The British pound demonstrated a firm upward trend as it broke through resistance at 1.2950 and that may become a trigger for continued growth up to 1.3050 and 1.3150. The growth potential at the end of the week is likely to be limited and in case of profit taking, the quotes may roll back to 1.2900.
The amplitude of price fluctuations significantly widened during today’s trading session but currently, the quotes remain in the 109.60-110.30 range. In case of overcoming the 110.30 level, the next targets will be located at 111.00. and 111.70. The closest support at the moment is at 109.60 and its breaking is less likely today.