Weekly technical outlook – USD/JPY, USD/CAD, EUR/GBP [Video]

US Nonfarm Payrolls – USD/JPY

The US dollar took a hit last week after its eight-week rally against six major currencies stalled, leaving traders wondering if its bull run has ended ahead of a busy calendar this week, especially against the Japanese yen.

Friday’s jobs report will be the last release before President Biden leaves the White House, and expectations are for a surge of 195k in nonfarm payrolls after November’s disappointing 12k increase, while private job positions could rise at a slightly faster pace of 200k after a contraction of 28k. On the other hand, the unemployment rate and the average hourly earnings might warrant some caution if the former ticks back up to 4.2% y/y and the latter eases to 3.9%. In any case, some normalization in the employment data is likely after the devastation from hurricanes and a prolonged strike at Boeing.

Key data such as the ISM manufacturing and non-manufacturing PMIs, initial jobless claims and the ADP private jobs report could provide early signals, though Powell’s commentary before the New York Times Dealbook summit on Wednesday could issue better guidance on December’s policy meeting as futures markets price in a 25 bps rate cut with a 65% probability.

Although a rate cut would be a reasonable move ahead of an uncertain policy season under Trump’s presidency, a negative surprise in the data could make it an easy decision. In this case, USDJPY could slump toward the 148.11 number, a break of which could squeeze the price toward the 144.85 area if the 146.50-147.00 territory fails to take action.

In the event of a stronger-than-expected release, the pair may push efforts to resume its positive profile above 153.40.

Canadian employment data – USD/CAD

USDCAD has been steady lately, with a recent spike to a 4-year high of 1.4176 that failed to hold. The Canadian jobs report could offer some direction on Friday, especially as investors debate between a 25bps or a 50bps rate cut taking place in December or January.

According to forecasts, employment growth is expected to bounce back, with a slight uptick in the unemployment rate to 6.6%.

The protective 20-day simple moving average keeps holding the outlook positive at 1.3976. Hence, a close below that floor could dampen market sentiment, likely causing a drop toward 1.3870 unless the 1.3945 barrier comes to the rescue.  

ECB lagarde’s speech – EUR/GBP

The euro currency has been in the doldrums against other major currencies as well, but EURGBP might attract special attention as the pair is currently approaching its 2½-year low of 0.8259 after getting rejected near the 0.8345 area.

Attention will be focused on ECB president Christine Lagarde on Wednesday as investors are looking for clues as to whether a 25bps or a 50bps rate cut will be delivered in December while also seeing the deposit facility interest rate sitting at 2.5% in January with a 62.6% probability.

If the 0.8260 floor cracks, the downtrend could take a bad turn toward the 0.8170-0.8200 territory. On the upside, an aggressive rebound above 0.8375 and perhaps beyond 0.8400 is required to put the negative trajectory into question.