Some Gains for the Dollar After a Stronger NFP

The US dollar made gains in most of its pairs in the aftermath of 20 November’s delayed NFP for September. Dollar-yen’s surge continued and euro-dollar tested $1.15 again, but cable gained overall. This article summarises the latest American job report and looks briefly at the charts of GBPUSD and USDJPY.

While total nonfarm was definitely much better than expected, it doesn’t clearly buck the trend of weaker releases since May:

119,000 is the biggest monthly gain accounting for revisions since April, which is clearly positive in the context of a clear general weakening in the American job market over the summer. Although August’s figure was revised down to negative 4,000, participants mostly reacted positively to the news.

However, unemployment continued to rise in September:

4.4% is the highest American unemployment in four years and the second consecutive rise in the monthly rate. Significantly, this will be the last monthly rate to be released before the upcoming meeting of the Federal Reserve (‘the Fed’) on 10 December due to data not having been collected during the government shutdown.

Overall, 20 November’s NFP was somewhat positive with annual average hourly earnings higher and total nonfarm much higher than expected, although unemployment rose and monthly earnings rose slightly less than the consensus. The main question for many participants is how accurate these figures are and how likely they are to be revised. It seems very likely that there’ll be at least some degree of revision to the total nonfarm.

The latest NFP hasn’t had a strong effect on the probabilities for the Fed’s next meeting, according to CME FedWatch. On the contrary, the probability of a hold late on 20 November was actually lower than the day before at around 56% compared to 70%. Intrigue as to whether there’ll be a cut next month is very likely to continue at least for the next week or so.

Lukewarm Bounce for Cable After the NFP

After some downward pressure on 19 November, with British annual headline inflation declining to 3.6% as expected, the cable recovered to some degree on 20 November despite a broadly positive NFP. Although political debate in Britain recently has centred on immigration reform, participants in financial markets remain focused on the upcoming budget, with concentration especially on how new measures might help to balance the deficit.

$1.30 remains in view as an obvious potential support while the 38.2% weekly Fibonacci retracement is the main technical reference in the short term. Although there’s no evidence yet that the overall downtrend has ended, momentum has been lower recently while volume hasn’t dropped. There’s no sign of saturation from either Bollinger Bands or the slow stochastic, with the latter very close to neutral.

The main dynamic resistance in the immediate future is the 20 SMA. If the price breaks above there, it might continue to $1.32 or possibly higher. Longer term direction for cable depends strongly on the contents of 26 November’s budget and markets’ reactions to it.

Dollar-yen Tests 10-month Highs Above ¥157

The yen has declined in recent days against most other currencies as speculation has increased that the Japanese government’s upcoming package of stimulus might exceed ¥20 trillion. Possibly unsustainable fiscal policy has driven a negative narrative on Japan, but based on previous interventions, there are some expectations that the Bank of Japan might act again if dollar-yen pushes close to ¥160. The dollar did generally better after 20 November’s NFP, which saw a significant positive surprise in total nonfarm; the probability of the Fed cutting on 10 December is now much lower compared to this time last month.

June 2024’s high slightly below ¥162 would be an obvious long-term target technically (please note that the Fibonacci retracements here are based on weekly closes, not wicks or tails) but for the fairly high probability of a direction intervention by the BoJ around ¥160. Equally, with the price around the new year 2025’s highs and strongly overbought, a retracement lower might seem favourable.

The 61.8% Fibonacci retracement slightly above ¥153 is a possible medium-term support, having been an unconfirmed resistance last month. The November 26 American GDP might provide more clarity on potential movements ahead.

This article was submitted by Michael Stark, financial content leader at Exness.

For the latest analysis, ideas for trading and more, follow Michael on X: @MStarkExness.

The opinions in this article are personal to the writer; they do not represent those of Exness. This is not a recommendation to trade.