US dollar higher ahead of jobs report

EUR/USD and GBP/USD slide as traders await the non-farm payrolls at 1.30pm (London time); the consensus is for an increase of 230,000 jobs in November and for the unemployment rate to remain at 5.8%.

US dollar notes
Source: Bloomberg

EUR/USD lifted by German data

The jump in Germany factory orders for October helped EUR/USD recoup some of the losses it suffered overnight. It was a double victory for German factory orders, as the October report showed a 2.5% increase which easily exceeded the 0.6% estimate; the September reading was revised higher from a 0.8% increase to 1.1%.

The relative strength of the Germany economy explains why the nation is opposed to any drastic moves like QE and, as I stated before, the country usually gets its way when it comes to eurozone affairs.

Mario Draghi may not have announced any plans for government bond purchases yesterday, but the European Central Bank chief did cut eurozone growth and CPI forecasts for next year to 1% and 0.7% respectively. The previous guidance (announced in September) was for 1.6% and 1.1%, and these figures were noted by traders.

Today’s session will be dominated by the US jobs report, and trading is likely to be subdued prior to the announcement. The US dollar basket is at a four-year high and yesterday we saw a pullback, but a good jobs report could trigger a fresh round of buying.

EUR/USD could encounter resistance at the 200-hour moving average of $1.2428, and the bears will be looking to $1.23 as the downside target.

GBP/USD traders await NFP report

GBP/USD remains in a tight range, and I expect that to be the case until the US jobs report is released. There were no real surprises from the Bank of England meeting yesterday, with interest rates and the asset purchase programme remaining unchanged, meeting market forecasts. Some of the major problems facing the BoE are outside of its control, as the slowdown in the eurozone and the slump in commodity prices poses a threat to the UK’s growth and CPI.

Non-farm payrolls will be at the centre of traders’ attention today, but as Chris Beauchamp stated the report has lost some of its impact. Nonetheless, it will add volatility to GBP/USD.

As Alastair McCaig noted, $1.56 has been providing support for GBP/USD, and $1.57 will be the initial upside target. A move through that level could see it retest $1.58. 

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