US payroll slumps despite low jobless rate
Fundamental outlook
US jobs openings fell despite the 49- year record low unemployment rate. US President Donald Trump’s administration reached a trade deal with Canada and Mexico and rebranded the agreement as USMCA. UK saw a slowdown in its economic growth from previously exceeding most forecast. This was probably due to challenges presented by the Brexit ordeal.
US ISM manufacturing index grew 59.8 in September, matching forecast. US ISM services index rose 61.6 in September, beating forecast and the highest since June 2007.
US unemployment claims for the week ended September 29 sank to 207,000, better than the revised 215,000 recorded during the previous week. The long-awaited monthly non-farm payroll dropped to 134,000 in September, missing forecast.
Unemployment rate was at 3.7 per cent, the lowest since 1969, while average hourly earnings stayed at 0.3 per cent gains on a monthly comparison. Fed chairman Jerome Powell indicated that the interest rates is still far from a ‘neutral’ level and hinted more rate hikes to come.
US Defense Secretary James Mattis canceled trip to China as trade tension rises. The US Government has reached a trade deal with Canada and Mexico, rebranding the NAFTA deal to USMCA. The agreement is mainly focused on changing provisions in auto-making industries and dairy products.
China’s Caixin manufacturing index rose to 50, the slowest since June 2017. China is celebrating the week-long vacation in conjunction with its national day and the market has been closed throughout the week.
Japan’s Tankan report ended September on a quarterly seasons grew to 19, the worst in five consecutive quarters. Final manufacturing index was at 52.5 in September, exceeding forecast. German retail sales dropped 0.1 per cent in September. The euro fell to a six-week low at 1.1500 as the dollar climbed higher.
Markit reported that UK’s manufacturing index gained 53.8 in September, beating forecast. Net lending to individuals was at four billion pounds versus a revised 3.88 billion pounds in August.
London’s Markit reported that the construction index rose 52.1 in September compared with 52.9 recorded during the previous month. Services index rose to 53.9 in September, matching expectations.
Technical forecast
US dollar/Japanese yen hit 114.50 resistance last week. The market might begin to consolidate sideways with support rising at 112.60. We expect some whipsaw movement in mixed trading from 112.60 to 114.50 as traders’ focus will shift to the euro currency.
Euro/US dollar fell to a sixweek low and it will probably continue to slide further in the coming week. Technically, we foresee the market is well resisted at 1.1570 with strong selling forces. Sinking below 1.1450 will open a bearish trend which could test the 1.13 area.
British pound/US dollar saw a support emerging at 1.2920 last week. This week, the trend might move into consolidation from 1.2920 to 1.320 as traders adjust positions in mixed trading. However, the market is still not optimistic about the long-term outlook for the pound as the Brexit remains as an obstacle before the British Government could reach a deal with the European Union officials.
Dar Wong is a professional in the financial industry based in Singapore with 29 years of global trading experiences. The expression is solely at his own. You may reach him at dar@pwforex.com.