While some traders continue to buy the euro and the British pound, others are waiting for the US employment report, which some experts say could be the last to show a steady level of hiring before a sharp downturn. Economists expect a rise of about 173,000 jobs in September. However, data that will be released a month from now could show a sharp decline.
For that reason, the employment report for September is unlikely to provide clarity on future Federal Reserve policy as it does not take into account the sharp deterioration in household financial conditions as well as a number of strikes ranging from writers to drivers. As some analysts noted, a slowdown in hiring usually precedes a higher unemployment rate. That dynamic could accelerate as early as this October. September's numbers will only add to the uncertainty by giving mixed signals about the state of the US labor market. It is also worth paying attention to the changes in average earnings. A decline will also indicate the overheated state of the labor market.
ADP employment change data issued on Wednesday showed the slowest pace of hiring growth since early 2021. That is why the expected data could be below economists' forecasts, which will support demand for risk assets in the short term.
With investors expecting the Federal Reserve to be nearing the end of its tightening cycle, changes in the labor market could have a major effect on the regulator's plans for future rates. If borrowing costs continue to rise amid a shrinking labor market, sooner or later the economy will collapse so badly that policymakers will quickly back away from their hawkish stance. Given the state of the bond market, few people believe that the Fed will completely stop its attempts to influence inflation via interest rate hikes. Just today's data may help investors clear up the situation, but there is little hope for that.
Regarding the technical picture of the EUR/USD, the euro is in demand. However, not everything will depend on today's data. To keep control, buyers should stay above 1.0560. Doing so could pave the way to 1.0590. From that level, there is potential to reach 1.0620, but achieving this without support from major players will be quite challenging. If the pair declines, significant actions from major buyers could be seen around 1.0530. If no one steps in at that level, it might be wise to wait for a new low of 1.0540 or to consider going long from 1.0470.
Meanwhile, pressure on the pound became weaker but did not disappear. A rise can only be expected after gaining control over 1.2190. Regaining this range will bring back hope for a recovery towards 1.2220, after which a sharper uptick to around 1.2270 can be anticipated. If the pair falls, bears will attempt to take control of 1.2150. If they succeed, a breakout of this range will affect bulls' positions, pushing GBP/USD towards a low of 1.2110 with the potential to touch 1.2060.
