Markets on Edge as NFP Uncertain, Powell Cools Cut Hopes
Low momentum keeps EUR/USD boxed between 1.1400 and 1.1700
The US Dollar received a boost from Fed Chair Powell last week, after he dampened expectations of another rate cut in December. He mentioned that a rate cut is “is not a foregone conclusion” and the opinion was shared by other members of the FOMC.
Powell’s remarks cooled rate cut hopes, while missing data keeps the Fed flying blind. The U.S. government shutdown is ongoing, and the longer it lasts, the more it will weaken the U.S. economy. This means the Fed will be pressured to make another rate cut in December to help the economy and boost job creation.
At the time of writing, the probability of a December rate cut sits at 63%, down from 92% a week ago, according to CME’s FedWatch tool. The longer the shutdown continues, the longer the Fed is making decisions in the dark. The Non-Farm Payrolls report is again marked as “Tentative” this week, so if nothing surprising happens until Friday, this will be the second unreleased NFP in a row.
Economic Calendar Highlights
The U.S Manufacturing PMI is scheduled for release on Monday at 3:00 pm GMT. It shows the opinions of purchasing managers regarding the state of the manufacturing sector and usually has a medium impact on the greenback. However, due to the lack of any other releases during this period, its impact may be bigger than usual.
On Wednesday at 1:15 pm GMT, we will get a glimpse into the job market situation with the release of the ADP Non-Farm Employment Change report. It tries to mimic the government-issued NFP, but since the NFP release is uncertain, the ADP version may be all we get. The Services PMI will also be released on Wednesday at 3:00 pm GMT.
Friday could be a wild day if the data marked as Tentative actually comes out. The Core PCE Price Index (main gauge of inflation), the Average Hourly Earnings, Unemployment Rate, and Non-Farm Payrolls are all on Friday’s calendar. However, if the U.S. government doesn’t reopen, the chances of these indicators seeing the light of day are slim.
Technical Outlook – EUR/USD
The pair is still trading in a range, but the last 3 days of the last week have shown an increase in volatility. Now, the biggest hurdle is the bearish trend line seen on the Daily chart below, and if the bears manage to break this barrier, we will probably see a stronger move south.
The bottom of the current range is located at 1.1400, and until a breakout occurs, we will probably see more of the current choppiness. To stage an attempt for the upper barrier of the range (1.1900), the bulls should first break 1.1700, but at this time, the uptrend seems exhausted.
