Traders are gearing up for a busy final trading session of the week today, with geopolitical developments once again going head-to-head with the highly anticipated US employment report. While the Middle East will remain firmly on the radar, a significant deviation from expectations in the employment numbers could quickly take centre stage, particularly across the FX market and the US Dollar.
The headline Non-Farm Employment Change is expected to show 85k jobs were added last month, with the Unemployment Rate holding steady at 4.2% and Average Hourly Earnings rising 0.3% month-on-month. With the US labour market remaining one of the key drivers of Federal Reserve expectations, any meaningful surprise in the numbers could trigger a sharp repricing of interest-rate expectations and generate some sizeable moves across the dollar.
Cable is looking particularly well set up for a big move, with the pair sitting close to some important technical levels ahead of the release. The US Dollar has spent much of the week under pressure as improving sentiment around the Middle East encouraged traders to move back into risk assets, helping GBPUSD push higher. However, the latest geopolitical headlines have taken some of the steam out of that move, with the dollar finding some renewed support and Cable pulling back from resistance. That said, today’s employment data is likely to be the bigger catalyst. GBPUSD remains relatively close to strong daily resistance just above the 1.3500 level, while initial support sits just 50 pips lower around the 200-day moving average.
A result around 25k either side of the expected 85k could be enough to generate some serious volatility. A stronger-than-expected employment print would likely see the US Dollar regain further ground, with Cable selling back towards the recent trading range. On the other hand, a weaker number could put the recent dollar weakness back in focus, with GBPUSD likely to challenge the 1.3500 resistance zone with a clean break above that level set to open the door towards the July high at 1.3557
Resistance 2: 1.3557 – July High
Resistance 1: 1.3513 – Trendline Resistance
Support 1: 1.3403 – 200 Day Moving Average
Support 2: 1.3270 – 28 July Low
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