All Eyes on Today’s U.S. NFP

• Weaker-than-expected ADP Nonfarm employment change hammers the dollar lower.  
• Gold rose to near all-time high levels ahead of the NFP reading with high Fed rate cut expectations.
• OPEC+ is set to extend oil supply cuts and may support oil prices. 

Market Summary

Ahead of today's highly anticipated Nonfarm Payroll (NFP) report, the U.S. dollar remains under pressure, with major market players like Citigroup and JP Morgan betting on a larger rate cut from the Federal Reserve this month. The ADP Nonfarm Employment Change report, released yesterday, significantly missed market expectations, while unit labour cost growth also fell short, reinforcing the likelihood of a substantial Fed rate cut. Jerome Powell's speech at the Jackson Hole Economic Symposium, combined with insights from the Fed's Beige Book, has underscored the importance of labour market health in the central bank’s decision-making process.

The heightened uncertainty has left the equity market lacking clear direction, with the NFP report expected to provide clarity. In the commodity market, the growing speculation around a Fed rate cut has pushed gold prices to their highest level of the week. Conversely, oil prices remain subdued, weighed down by a deteriorating demand outlook. OPEC+ has signalled a potential delay in restoring oil production in October and November, hoping to stabilise prices amidst the weak demand environment.

Current rate hike bets on 18th September Fed interest rate decision: 

Source: CME Fedwatch Tool

-50 bps (32.5%) VS -25 bps (67.5%) 

Market Movements

DOLLAR_INDX, H4

The Dollar Index retreated after testing resistance levels, with market focus shifting to the upcoming US Nonfarm Payrolls and Unemployment report. Recent disappointing JOLTS Job Openings data dialed down optimism about US economic progress. The report showed job openings fell to 7.673M, below expectations of 8.090M. This has increased the probability of a 50-basis points rate cut to 48%, up from last week’s 36%, diminishing the dollar’s appeal.

The Dollar Index is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum. However, RSI is at 25, suggesting the index might enter oversold territory. 

Resistance level: 101.70, 102.35

Support level: 100.55, 99.70

XAU/USD, H4

Gold prices rebounded sharply after the ADP data came in below 100K, raising concerns over the broader US jobs outlook. Investors are now anticipating a 50 basis points rate cut in September, which has reignited recession fears and boosted demand for gold as a safe haven.

Gold prices are trading higher following the prior breakout above the previous resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 67, suggesting the commodity might experience technical correction since the RSI retreated sharply from overbought territory. 

Resistance level: 2525.00, 2555.00

Support level: 2505.00, 2480.00

GBP/USD，H4

The GBP/USD pair has climbed back into its previous liquidity zone, indicating a potential trend reversal signal for the pair. The U.S. dollar continues to weaken after yesterday's U.S. job data disappointed, with the ADP Nonfarm Employment Change dropping to 99k, well below expectations, and unit labour costs also coming in lower than market consensus. These data points have put further pressure on the dollar, leading it to trade lower as market participants adjust their expectations for a potential larger Fed rate cut later this month. 

GBP/USD has climbed by more than 0.5% for the last two sessions, suggesting a potential trend reversal for the pair. The RSI has risen to above 50, while the MACD is on the brink of breaking above the zero line, suggesting bullish momentum is gaining. 

Resistance level:  1.3220, 1.3280

Support level: 1.3140, 1.3065

EUR/USD，H4

The Euro has gained over 0.6% in the last two sessions and is nearing a breakout above its long-term downtrend resistance, signalling a potential bullish reversal for the pair. The weakening of the U.S. dollar, driven by disappointing job data, has provided momentum for the Euro, helping shift the trend. In addition to today's U.S. Nonfarm Payroll (NFP) report, Euro traders will closely watch the Eurozone GDP reading, which is expected to show signs of economic improvement. A positive GDP figure could further strengthen the Euro and fuel the ongoing trend reversal.

EUR/USD has climbed for the last two sessions. If the pair successfully breaks above the downtrend resistance level, it will be a bullish signal for the pair. The RSI has rose to near the overbought zone, while the MACD has broken above from the zero line, suggesting the pair is trading with bullish momentum. 

Resistance level: 1.1170, 1.1230

Support level: 1.1040, 1.0985 

Dow Jones, H4

The U.S. equity market continued to slide, with the Dow Jones leading the losses, falling by over 200 points in the last session ahead of today's crucial Nonfarm Payroll (NFP) data. The Dow, which was trading near its all-time high, has been weighed down by profit-taking and disappointing U.S. economic indicators. However, with the index approaching the 38.2% Fibonacci retracement level, there is potential for a technical rebound if today's NFP report delivers favourable results for the equity market. Traders will be closely watching to see if positive job data can reverse the current downward trend.

The Dow has been declining for the last 2 sessions and the index has dropped to near the Fibonacci retracement level of 38.2% and may have a chance to perform technical rebound. However, the RSI has dropped to below 50 level and the MACD has a deadly cross on the above suggest the index is now trading with strong bearish momentum. 

Resistance level: 40900.00, 41600.00

Support level: 40450.00, 40100.00 

EUR/JPY, H4

The EUR/JPY pair has declined by over 2% this week, driven by the strengthening Japanese Yen amid heightened expectations of a potential Bank of Japan (BoJ) rate hike. Meanwhile, the euro has been under pressure, lacking a strong catalyst to support its performance. However, with the eurozone GDP data set to be released today, an improvement in economic performance could provide the much-needed support for the euro, potentially sparking a rebound in the pair.

The pair is consolidating after declining for the past 2 sessions, and it would be a solid bearish signal if the pair dropped below its current support level at 158.85. The MACD has dropped to below zero, and the RSI is on the brink of dropping into the oversold zone, suggesting the pair is trading with bearish momentum. 

Resistance level: 161.10, 163.80

Support level: 155.85, 153.15

CL OIL, H4

Oil prices initially rebounded after a bullish US crude oil inventory report showed a sharp decline of 6.873M barrels, far exceeding expectations of a 0.600M drop. However, concerns over a weak global economic outlook continued to weigh on overall oil demand prospects.

Oil prices are trading lower following the prior breakout below the previous support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 29, suggesting the commodity might enter oversold territory. 

Resistance level: 71.80, 74.30

Support level: 68.25, 65.80