USD bulls defend 100, NFP and ISMs in focus: The Week Ahead

US data takes the limelight again, with the ISM services and manufacturing report alongside NFP standing out on the calendar. I doubt the Vice President candidate debate will amount to much for markets, but it may be one to earmark for entertainment purposes. Beyond that, final PMIs are nice to see but not likely to be a huge driver. And the same can be said for China’s PMIs as they won’t capture the recently announced stimulus.

The Week Ahead: Calendar

ISM manufacturing and services

Both of the August ISM reports surprised to the upside, although it is clearly the services sector which is actually expanding. New orders also expended at a faster pace for services, and if this trend continues it could excite USD bulls. However, while services surprised to the upside its rate of expansion has been trending lower for some time. And I fully expected USD bears to pounce upon any slight cracks on the services report, particularly if the employment component softens ahead of Friday’s NFP report.

Nonfarm payrolls report (Friday)

August’s payrolls figures threw a spanner in the works for those calling a US recession. Unemployment fell to 4.2% and 140k jobs were added. Moreover, earnings rose at the fastest pace in four months at 0.4% m/m, and picked up to 3.8% y/y. When placed alongside stronger-than-expected manufacturing and services ISMs, CPI and PPI, I still suspect the Fed will move in 25bp increments going forwards.

Especially if we see NFP figures remain firm in next week’s report. Note that the 140k jobs added was above its 3-month average, so any figure above 141k can be seen as a strengthening jobs market. As could an unemployment number at 4.1% or less. If such figures arrive, an arguably oversold USD could provide a decent bounce.

Trader’s watchlist: EURUSD, USD/JPY, WTI Crude Oil, Gold, S&P 500, Nasdaq 100, Dow Jones

USD index technical analysis:

Over the past weeks the USD index has fallen over 5%, mostly in a slight line. Yet bearish momentum has been waning since the August low, and prices have failed to break beneath it despite a high-volumed bearish week last week. The market is also on track to form a inside week and doji should it close around current prices, which could play into the case for a pending countertrend move.

I am getting similar vibes from the daily chart. The 100 handle, 2024 open and historical weekly VPOC (volume point of control) also reside around the August low, which simply reinforces it as a support level. And when you consider that price held above support despite a 50bp Fed cut, I continue to suspect a decent bounce is on the cards as a robust US economy seems more likely to pump out better-than-expected numbers next week than not.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.