The USD outlook

The USD Outlook – Elliott Wave

(Gregor Horvat – Wavetraders)

PCE was out yesterday, showing that the Inflation is stable. Also, on Wednesday speculators wanted to see if Powell will stay hawkish or be even more aggressive; he was the complete opposite, despite still good jobs data in the last few months (it’s below 4%). From this, we can assume that even if jobs data will stay fine today, Powell will stick to his plan, because he did not mention that the next decision will depend on jobs. He said 100K is the line for the creation/destruction of jobs. But if suddenly jobs will get worse, then this will be another confirmation for slowing down the hiking pace, which is not impossible, considering that economy is slowing down. But of course, it really depends on how big would be the potential NFP miss, below 100k would likely cause a shock on stocks which eventually can lead to a DXY rally later, but only for a correction IMO.

There will be pullbacks of course. Here is the Elliott wave count I am looking at; potential impulse from a monthly channel top.

I will turn back bullish if I see a strong bounce back to 109.

How strong/soft US NFP should be to keep S&P 500 rallying? [Video]

(Ipek Ozkardeskaya – Swissquote Bank Ltd)

The sentiment was mixed during yesterday’s trading session. Equity bulls were timid, while the dollar bears were in charge of the market after the latest PCE data, which is the Fed’s favorite gauge of inflation showed that the core PCE index slowed more than expected in October.

The softening inflation sent the US dollar index tumbling below its 200-DMA for the first time since the summer of 2021. The US dollar index slipped below its major 38.2% Fibonacci retracement on the 2021-2022 rally and stepped into the bearish consolidation zone. Finally!

Trading in equities was much less festive than the FX yesterday, as the ISM manufacturing index warned that the US manufacturing activity fell below 50, the contraction zone, for the first time since the summer of 2020.

Today, the much-expected jobs data should determine whether the S&P500 deserves to quit the YTD negative trend or stay in it. How strong, or soft the NFP data should be to keep the equity rally going?

EUR/USD: Will be the US jobs data the cause of the correction?

(Vasilis Tsaprounis – TopFX)

The single European currency maintains the gains of the last two days and remains above the 1,05 level ahead of the very important data on new jobs in the US economy.

The past two days have been particularly favorable for the euro as a set of macroeconomic announcements as well as the Fed Chair’s speech create the prospect that the US central bank will slow down the pace on interest rate hikes.

As early as Tuesday I pointed out that I would give a high chance of de-escalation of inflationary pressure based mainly on the recent decompression of oil and natural gas prices.

Indeed, the developments confirmed this thought, as well as in the European economy, the latest announcements showed that inflation pressures do remain at high levels, but show some first signs of retreat, while correspondingly in the US, the decline in prices was much more intense, which was the main cause of the recent rally of the European currency.

The widening of the gap in interest rates between the Fed and ECB was the decisive factor that in recent months led the European currency to suffer significant losses and retreat to the levels of 0,95.

I have repeatedly stated that the market had already digested all these developments, and the expected limitation of this gap as I had previously mentioned several times would lead the exchange rate to return to the levels of 1/1 but also well above it.

The market Indeed in a relatively short period of time it has recovered well above the 1/1 level and already trading near 1,05 but now I will be quite cautious as to whether this upward Momentum can have the same speed in the near future.

In my yesterday’s report, I noted that there is a significant chance that we will see new tops in the pair which Indeed did happen.

Today’s US new jobs announcement will be a determining factor as to whether we will see more bull run in the European currency or a sharp correction if the data is too strong.

Have faithfully followed the strategy of buying the European currency on every dip, which has not disappointed me so far, but at the moment I think that the levels in the current conditions are quite high, so I would not risk a position in favor of the Euro at such prices.

There is some good probability that the US currency will gain ground again.

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