29 Oct 2024

• Investors will pay close attention to the US JOLTS data in anticipation of the October employment report scheduled for release on Friday.
• It is expected that job openings will decrease slightly to below 8 million in September.
• The condition of the labor market plays a crucial role for Federal Reserve officials in determining policy decisions.

The Job Openings and Labor Turnover Survey (JOLTS) is scheduled for release on Tuesday by the United States Bureau of Labor Statistics (BLS). This report will present data concerning the fluctuations in job openings for September, as well as information on layoffs and voluntary separations.

Market participants and policymakers at the Federal Reserve (Fed) closely analyze JOLTS data, as it offers critical insights into the supply and demand dynamics within the labor market, which significantly influence wages and inflation. Since exceeding 12 million in March 2022, job openings have been on a consistent decline, indicating a gradual cooling of labor market conditions. However, in August, this downward trend was interrupted, with job openings rising to over 8 million from 7.7 million the previous month.

What to expect in the next JOLTS report?

Markets anticipate that job openings will reach 7.99 million on the final business day of September. Following the July policy meeting, Federal Reserve (Fed) officials have indicated a shift in their focus towards the labor market, in light of positive indications that inflation is moving closer to the central bank's target.

It is crucial to recognize that while the JOLTS data pertains to the end of September, the official Employment report encompasses data for October.

The favorable employment report for September, which indicated an increase of 254,000 in Nonfarm Payrolls (NFP), led market participants to avoid factoring in another significant Fed rate cut at the upcoming policy meeting scheduled for November 7. In evaluating the recent employment figures, Kansas City Fed President Jeffrey Schmid suggested that the labor market is stabilizing after a phase of unprecedented over-employment and unsustainably low unemployment rates, rather than experiencing a decline.

The CME FedWatch Tool currently indicates that markets are almost fully anticipating a 25 basis points (bps) rate reduction at the next policy meeting. Additionally, the likelihood of an additional 25 bps rate cut in December is approximately 72%, compared to a 27% chance of maintaining current policy.

Should there be a positive surprise in the job openings data, with a figure of 8.5 million or higher, the immediate market reaction could strengthen the US Dollar (USD) as investors reevaluate the likelihood of a December rate cut. Conversely, a disappointing figure of 7.5 million or lower could negatively impact the USD.

The Bureau of Labor Statistics (BLS) reported in its August JOLTS report that "over the month, hires changed little at 5.3 million. Total separations changed little at 5.0 million." It further noted that "within separations, quits (3.1 million) continued to trend down and layoffs and discharges (1.6 million) changed little."

The JOLTS report is scheduled for release on Tuesday at 14:00 GMT. Eren Sengezer, the European Session Lead Analyst at FXStreet, provides insights on how the JOLTS data may influence the EUR/USD currency pair:

"Unless there is a notable discrepancy between market expectations and the actual figures, the market's response to the JOLTS data is expected to be brief. Investors are likely to avoid making substantial positions in anticipation of the third-quarter Gross Domestic Product (GDP) figures and the employment report for October, which are set to be released on Thursday and Friday, respectively."

"The short-term technical outlook for EUR/USD indicates that the bearish sentiment remains prevalent. The Relative Strength Index (RSI) on the daily chart is positioned below 40, and the 20-day Simple Moving Average (SMA) is diverging from the 100-day SMA following a bearish crossover that occurred late last week."

"On the upside, the level of 1.0870, which corresponds to the Fibonacci 23.6% retracement of the October downtrend and the 200-day SMA, serves as a significant resistance point. Should EUR/USD surpass this level and establish it as support, technical buyers may enter the market. In such a case, the next bullish target could be 1.0930, representing the Fibonacci 38.2% retracement and the 100-day SMA, followed by the psychological level of 1.1000. Conversely, initial support may be identified at 1.0770, marking the end of the downtrend, followed by 1.0700 and 1.0620, which is a static level from April.""

On the upside, the level of 1.0870, which corresponds to the Fibonacci 23.6% retracement of the October downtrend and the 200-day SMA, serves as a significant resistance point. Should EUR/USD surpass this level and establish it as support, technical buyers may enter the market. In such a case, the next bullish target could be 1.0930, representing the Fibonacci 38.2% retracement and the 100-day SMA, followed by the psychological level of 1.1000. Conversely, initial support may be identified at 1.0770, marking the end of the downtrend, followed by 1.0700 and 1.0620, which is a static level from April."