05.12.202509:40 Forex Analysis & Reviews: Strong US Labor Market Report Left No One Indifferent

Yesterday's reaction to US jobless claims data led to a surge in volatility across both currency and stock markets. As it became known, last week the number of claims fell to its lowest level in more than three years, indicating that employers are still largely retaining employees despite a wave of recent layoffs.

The number of initial jobless claims decreased by 27,000 to 191,000 for the week ending November 29. However, it is worth noting that weekly claims data can be particularly volatile during holiday seasons. Nonetheless, this figure was below all forecasts gathered in an economist survey. The four-week moving average of new claims, a measure that helps smooth out volatility, fell to 214,750 last week. This is the lowest level since January, according to Labor Department data.

This unexpected decline is undoubtedly a positive signal for the American economy, demonstrating its resilience amid the ongoing fight with inflation and high interest rates. While this does not directly indicate that the labor market situation has normalized, current values are certainly encouraging.

However, some experts urge caution in interpreting this data. The holiday season typically involves increased volatility in economic indicators, making it difficult to accurately assess the overall trend. Additionally, potential delays in processing applications that may have arisen due to the holidays should be considered.

"At this time of year, the number of initial claims can fluctuate significantly, so we won't draw too many conclusions from one week of data," noted Oxford Economics. "Nevertheless, the number of initial claims remains within a range consistent with relatively low job-cutting rates, despite recent announcements of layoffs."

It is worth recalling that in recent months, many employers have sharply reduced hiring, and some major corporations, including HP Inc. and FedEx Corp., have announced layoffs. However, the data released on Thursday indicates that actual dismissals remain limited, helping to dispel concerns about a rapid deterioration in the labor market.

According to ADP Research data released on Wednesday, US companies cut jobs in November by the most in the past two years, primarily due to small businesses. This report, along with the weekly claims data, will assist Federal Reserve officials next week in deciding what to do about interest rates.

At this point, buyers need to consider how to regain the 1.1680 level. Only this will allow for targeting a test at 1.1705. From there, it could climb to 1.1725, but doing so without support from major players will be rather challenging. The farthest target will be the high of 1.1753. If the trading instrument drops significantly near 1.1650, I expect major buyers to take serious action. If no one is there, it would be advisable to wait for a retest of the low at 1.1625 or open longs from 1.1590.

As for the pound, buyers need to reclaim the nearest resistance at 1.3360. Only this will allow targeting 1.3395; breaking through above it will be quite difficult. The farthest target will be the area of 1.3415. If the pair falls, bears will attempt to take control of 1.3320. If they succeed, breaking through that range will deal a serious blow to bullish positions and push GBP/USD down to the low of 1.3290, with the prospect of reaching 1.3270.