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Jignesh Davda

US Job Gain Expected to Rebound in November

Analysts are expecting last month’s job gain to be higher than the prior four months. A justification for this is the return of about 46,000 workers from GM plants that were on strike in October.

Reports released earlier in the week contradict the view as the ADP’s version of the report fell notably short. The data revealed 67,000 new workers in November while analysts were looking for an extra 137,000 workers.

The jobs report will shed some light on US monetary policy and if the Fed might the right decision to keep their powder dry at their last meeting.

But I expect that the markets will have their eye on the bigger picture which is the UK election. In less than a week, UK citizens will head off to cast their votes and the outcome will determine how Brexit evolves from here.

The price action in the pound to dollar exchange rate this week suggests the markets see a Tories victory and a further deterioration of a no-deal Brexit scenario. The risk of a sharp correction will tend to amplify over the next few days, although I would expect a significant catalyst is needed for prices to reverse at this stage.


Technical Analysis

An indicator I’ve had my eye on for most of the week comes from a weekly chart. I’m looking at the 200-week moving averages and I think how the pair closes relative to it will be important for price action early next week.

Further, there is a horizontal level at 1.3145 that was responsible for keeping the pair lower on a weekly close basis in the second half of 2018.

GBPUSD Daily Chart

The current rally has a lot of momentum behind it. This leads me to believe that dips will be bought. And I think this holds true for the US jobs report later today. If the report triggers a bounce in the dollar, buyers are likely to see it as an opportunity to get long GBP/USD.

Bottom Line

  • The US jobs report stands to offer near-term volatility. However, I expect that investors will be more focused on the UK elections.
  • Resistance at 1.3145 was important on a weekly chart around the middle of 2018. Further, the 200-week moving average, currently at 1.31, is in play.
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