02.12.202404:59 Forex Analysis & Reviews: EUR/USD: A Hot Start to December with ISM Indexes, Powell's Speech, and November Nonfarm Payrolls

December can be divided into two unequal parts.

The First Part (the first three weeks) is characterized by heightened volatility in the forex market as traders react to key monthly releases and the final central bank meetings of the year. The Second Part is the pre-holiday and post-holiday period. For the EUR/USD pair, the Federal Reserve typically provides the final word, holding its last meeting in late December (this year on the 18th). A few days earlier, the European Central Bank will announce its decision (scheduled for December 12 this year). By then, almost all major macroeconomic reports for November and October will have been published, and conclusions will have been drawn.

The first week of December plays a particularly important role in this context.

Monday

The final readings of November's PMI indexes will be released during the European session. According to forecasts, the final estimates will match the preliminary figures. These figures previously placed significant pressure on the euro as most came in below expectations, reflecting growing pessimism within the European business sector. If the indexes are revised downward, the euro may face additional pressure.

However, the most significant report for EUR/USD will be released during the U.S. session: the November ISM Manufacturing Index. Since April, this index has been in contraction territory, falling to 46.5 in October. November's forecast anticipates a modest recovery to 47.7. The index could substantially support the dollar if it unexpectedly breaks above the 50-point threshold into expansion territory, though this scenario is unlikely. If the index meets expectations, market reaction will be muted, but any deviation could trigger high volatility.

Additionally, Federal Reserve Governor Christopher Waller will speak on Monday. His last public appearance was in September when he supported more aggressive monetary easing if U.S. economic data deteriorated. His stance will be closely watched, especially in light of Donald Trump's election victory and rising inflation.

Tuesday

The U.S. labor market will be the focal point as the JOLTS report on job openings is published. This data reflects the number of job vacancies in the private sector at the reporting month's end, adjusted for seasonal factors. After a decline in June and July, the indicator rose unexpectedly in August but fell again in September (7.443 million). For October, the forecast is 7.490 million. The release could cause volatility if it significantly deviates from expectations.

Key speakers include New York Fed President John Williams, Chicago Fed President Austan Goolsbee, and Fed Governor Adriana Kugler.

Wednesday

The U.S. session will begin with the ADP employment report, which serves as an early indicator of potential changes in the U.S. labor market. This release gains importance as it precedes the official Nonfarm Payrolls by two days. Preliminary forecasts are unfavorable for the dollar, with expectations of just 166,000 new private-sector jobs. A weaker-than-expected report could weigh on the dollar ahead of the official Nonfarm Payrolls release.

Additionally, the November ISM Services Index will be published. Experts anticipate a result close to October's 55.5 (previous value: 56.0). For dollar bulls; it is crucial that this indicator remains above the 50-point mark.

Fed Chair Jerome Powell is also scheduled to speak. His comments in early November caused significant EUR/USD volatility when he indicated that the Fed might not rush to cut interest rates. Since then, the probability of a rate cut in December has dropped to 29%, according to CME FedWatch. Powell's remarks, particularly on the core PCE index (which rose to 2.8%), could significantly influence market sentiment.

Thursday

Germany will release data on industrial orders. Expectations are for a 2.1% decline in October, following a 4.2% increase in September.

The weekly initial jobless claims report will be released in the U.S. Last week's figure was 213,000, the lowest since May. The forecast suggests a slight increase to 215,000. However, this data may be overlooked as the market shifts focus to Friday's Nonfarm Payrolls.

Friday

The spotlight will be on November's Nonfarm Payrolls. Last month, the U.S. labor market shocked traders with a modest 12,000 job gain. However, this figure was distorted by strikes and natural disasters. With no such disruptions in November, traders eagerly anticipate more accurate data.

Forecasts suggest that the unemployment rate may rise slightly to 4.2% after holding at 4.1% for two months. Employment growth is expected to show a robust gain of 205,000. Any figure above 200,000 will provide strong support for the dollar.

The wage growth indicator, a pro-inflation metric, is forecasted to remain 4.0%. For dollar bulls, it is critical that this figure does not fall below 4%.

Conclusions

This week promises to be information-rich and highly volatile. If the ISM Manufacturing Index beats expectations, November Nonfarm Payrolls deliver strong results, and Powell maintains a cautious tone, the market may revisit discussions of a December rate pause. In this case, the dollar could gain traction, driving EUR/USD back into the 1.04 range. Conversely, weaker U.S. data could allow buyers to push EUR/USD above the 1.0630 level, aligning with the middle Bollinger Band and Kijun-sen line on the daily chart.