The NFP shows the troublesome truth of the US labor environment – Market Overview – December 4

The NFP shows the troublesome truth of the US labor environment – Market Overview – December 4

Macro data makes and breaks FX technical consolidation day

EURO Strength

The Euro continues to show strength against all its counterparts, not only against the US Dollar, after economic figures show positive signs, exceeding market expectations; even though the evolution of the pandemic crisis in Europe during this fourth quarter has been worrying as the numbers of infected are much higher than those of the first wave that took place in the second and third quarters of this year.

Today, the Factory Orders figure for October from Germany has been published, which has far exceeded market expectations with 2.9% vs. 1.5 expected.

As a result of this good Euro performance of the EUR /JPY, a currency pair that tends to positively correlate with market risk sentiment and has been recovering lost territory since the end of May, is approaching a long-term significant resistance zone.

In the weekly chart, we can see the level of 128, which has not been exceeded in the last two years and whose break, that is to say, that it is traded with a weekly closing above 128.00, would end the previous downtrend that has been operating since February 2018, and, from a purely technical perspective, it would be projected to targets above the 133.00 area.

The British Pound & BOE

The Pound also continues to experience an extraordinary upward momentum, with an occasional tug of war in its price, which is very characteristic of this currency that usually has a higher degree of volatility than the rest of the major currencies.

However, the volatility is justified on this occasion, given the lack of clear information on the results of the meetings that representatives of the European Union and the United Kingdom are holding daily to agree on the terms of Brexit.

Today it has been stated that a satisfactory settlement will most likely be obtained as soon as this weekend. But at the same time, the negotiation participants have left the meeting place and headed for their respective countries. France has once again insisted that they will block any agreement that they consider unsatisfactory.

And the member of the Bank of England's monetary policy committee has spoken out in favor of increasing the asset purchase program and even cutting interest rates negative if the economy does not improve as it should. These "dovish" comments affect pushing Sterling down, if only at the time of declaration.

GBP/USD has already managed to overcome the first resistance at 1.3400 and is very close to the level that has acted as the primary resistance in recent years at 1.3500.

Its overcoming would suppose a vital upward impulse to this pair of currencies, from a perspective of technical analysis.

The US labor market overview – the NFP

Finally, today the expected Non-Farm Payroll figure has been published, the leading figure in the labor market and currently the subject of the Federal Reserve's attention to evaluating its monetary policy.

The Non-Farm Payroll figure has been well below what the market expected, as was the case with the ADP figure last Wednesday, 245k vs. 469k expected, a figure that does not show evolution as positive it should be after the stimulus measures already implemented in the economy.

The unemployment rate improves one-tenth to 6.7%, and essential data such as average hourly earnings have risen to 0.3% from 0.1%. This data shows salary improvements, which is usually a good indicator of the labor market's evolution.

So, mixed numbers but with the main headline well below expectations and slightly negatively affecting the US Dollar, especially its price against the Yen, USD/JPY has dropped around 20 pips on the news.

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