A1 Trading Company

November 2, 2023

GBP, CAD & USD Analysis Pre-NFP

Frank Cabibi

The BoE announced their latest bank rate policy and remained unchanged at 5.25% this morning. Meanwhile, the US and Canada have employment numbers coming out tomorrow which will heavily influence the movement of these currencies as a result. Here are some ideas and setups going into tomorrow's news and after GBP interest rate results.

EdgeFinder Analysis

USDCAD - once a strong bullish reading - is now losing ground according to the EdgeFinder. The dollar is now weaker due to the FOMC conference yesterday that called for similar policy around inflation. However, he did mention how a strong jobs market is hoped for despite inflationary worries.

We are in a strange environment where wage growth and NFP could come out in different directions and be bad for USD. The combination of higher jobs in the US and Canada with lower inflation (wage growth) could spell bearishness for UC.

GU struggles on the 1D timeframe even though the US indices are higher. Expectations are still looking for a lower number of added jobs, however, the last two months have beaten expectations by a long shot. Price is green on the day but gave back some of its highs early on in the day.

The pair is clearly oversold, but the downside could still be strong. It looks like the next level of resistance is around 1.22600s if it can break above the falling trend line first. The UK is not in a good economic place as they still suffer from inflation but also cannot afford another rate hike. So, despite dollar weakness, it is still likely stronger than the pound.

The SPX500 is now a strong buy on the EdgeFinder. At +8, the index is seeing its highest score since August. As we head into another NFP report, here are some things to consider for the US stock markets in regards to Fed policy:

It appears that a strong NFP is no longer bearish for the index, as long as inflation can come down. So what will matter tomorrow is not only NFP, but the wage growth number. If wages come in lower, we will have a good indication that inflation is coming down and indices may be optimistic.

Retail Spotlight

Retail is heavily short the dollar while mixed on the indices, and short USDCAD and USDJPY.

Fundamental Spotlight

Here is the study surrounding the US and UK labor market. The USD tracks NFP while GBP tracks Employment Change. The pound is almost swept in the labor market section against the USD, but still holds a majority bearish outlook. Seeing a higher NFP will keep the -1 score for US, but it will cause GBP to be stronger on the employment front, and therefore cancel out.

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