A new month begins as the week finishes, but just in time for US Non-farm Payrolls. The release, later today, of this Tier 1 data will most likely have a decisive impact on markets, US markets in particular. So far today, Japanese Final Manufacturing PMI has come in just above target at 50.3 versus 50.0 expected. However, Caixin Manufacturing PMI for China fell to 48.3 against an expected 49.5 from 49.7 previously. This may create some concern for the global economy going forward as the data has reached a three year low. This has been felt with a move lower in AUD. US-China trade talks concluded in Washington on a positive note with “important progress made” and China importing more soybeans from the US. The next round of talks is scheduled to begin after the Chinese New Year in Beijing.

Markets are settling into a holding pattern ahead of the US Nor-farm Payrolls data release that is expected to come in at 165K against the previous reading of 312K. Average Hourly Earnings are expected to be 0.3% from 0.4% previously. The Unemployment Rate is expected to be 3.9% from 3.9% previously. Later on in the afternoon, US ISM Manufacturing PMI is expected to come in at 54.1 and match its prior reading.


The GBPUSD pair has broken its somewhat weak trend line resistance, close to 1.3100, but with the level of uncertainty generated by the Brexit process, traders are unable to capitalise on the move higher. A definitive decision and outcome would potentially drive price in a directional vector but traders are reluctant to over-commit at present. The pair has moved higher on the likelihood that an extension may occur. A continued move higher above 1.3200 targets the 1.3298/1.3300 and may attempt a test towards 1.3400.

A break back under the trend line support and the 1.1300 area may put pressure on the 1.3000 level. Below this point, 1.2925 might come into play followed by the area around the 1.2800 level. Further support may influence price action below 1.2700 at the 1.2665 area. This area has been used repeatedly on the chart. The low for 2019 so far has been 1.2438 and a loss of 1.2500 may find price action test down to that low. US economic data today may have a sizable impact on the pair.


The USDCAD chart shows how price action has broken supporting trend lines and levels in a drive lower as the USD weakens. The high for 2019 around 1.3665 formed a ceiling that traders were unable to break and the subsequent selloff has led price to the 1.3150 level. Support for the pair at this week’s low of 1.3119 was tested on Wednesday after a Dovish FED released its FOMC Statement. A loss of this support may target the 1.3000 area if price falls under 1.3100. Below these levels, the 1.2900/1.2885 area comes into play. The October low at 1.2782 may offer sellers an interesting target.

US data release in the afternoon might provide an impulse in the pair that may change the narrative sufficiently and might lead to a push higher in price to retrace the selling of the last month. The opposite outcome may also take place. As resistance goes, yesterday’s high at 1.3165 or the low from early January at 1.3180 might become levels of interest. A break above 1.3200 opens up the 1.3300 area, followed by the lower high around 1.3375. Above this area there is the potential for a short squeeze towards 1.3444 and 1.3566, followed by the highs above 1.3600.


Phillip Konchar


Core Spreads

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