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Forex pairs in this Article » USD, AUD/USD, EUR/USD, GBP/USD, NZD/USD, USD/CAD
Talking Points:

  • Dollar Faces NFPs, Unresolved Taper Issues and an 11-Day Range
  • Euro Rallies as Stimulus Deferred at Least a Month
  • British Pound Loses Ground Despite BoE Hold, Growth Upgrade
Dollar Faces NFPs, Unresolved Taper Issues and an 11-Day Range

The Dow Jones FXCM Dollar Index (ticker = USDollar) has held a 70-point range for 11 straight trading days. That is a remarkable feat in itself, but it is even more incredible when we consider its risk counterpart – the S&P 500 – has matched its longest decline in 17 months, the VIX volatility index has jumped this past week and the 10-year Treasury yield is again above 2.85 percent. These are individually elements of a dollar rally that have yet to inspire greenback bulls to action. That could be a reason for concern. A market that minimizes encouraging fundamentals is frequently a bearish one. Yet, we are more likely witnessing a situation where traders are simply holding back in anticipation of an event that can unify and charge both risk trends and stimulus expectations – the November labor data.

Ever since the Fed surprised the market by forgoing a Taper decision that was heavily priced in at the September 18 policy meeting, there has been a perceptible bias amongst the speculative ranks to find evidence to support an indefinite postponement. Yet, week-after-week, the argument for a reduction in the $85 billion-per-month QE3 stimulus program has solidified. On the data front, we have seen steady if not outright improvement in the key series. In the October FOMC statement and this week’s Beige Book, the policy group dismissed concerns of fiscal problems spilling over and conspicuously repeated an optimistic economic assessment. Furthermore, individual bank members are repeatedly attempting to separate the Taper from rate hikes, while the cost of stimulus is being given more consideration.

The upcoming labor report is not a definitive signal for a near-term or more distant Taper decision. Rather, this is a big-ticket item that can sway the balance of speculation – arguably a more effective market mover. For splashy headlines and a kneejerk risk response, the NFPs (nonfarm payrolls) number will be the first look. Yet, the real impact comes through the same data that the central bank monitors for its own policy making. The jobless rate – expected to tick down to 7.2 percent – will be the most inclusive data point, though labor force participation and the PCE (the group’s preferred inflation data) will help shape a more complete picture. A trend from the dollar through risk trends and relative stimulus may not become immediately clear Friday as head into the weekend. However, trends often develop in the week following NFPs.

Join David Rodriguez as he covers the market's reaction to the NFPs release live in DailyFX-Plus

Euro Rallies as Stimulus Deferred at Least a Month

The ECB (European Central Bank) further laid the groundwork for a fresh round of stimulus with its policy decision this past session. And yet, the euro managed to advance against most of its counterparts with a notable 0.5 percent climb for EURUSD. Why was the currency not driven lower by the prospects of a balance sheet reversal that would water down yields? Because, it wasn’t happening at this particular gathering. There was inevitably some level of speculation that the central bank was set to follow up on its surprise November rate cut (25 basis points to 0.25 percent) with a move to negative rates or an LSAP (large-scale asset purchase program). As such, there was a measure of ‘relief’. That said, the probability of further accommodation is growing. President Draghi remarked that different programs were again discussed with greater detail as to how they would be implemented. A forecast for inflation to remain below target possibly out until late 2015 is another aspect shaping ‘justification’. Going forward, the level of attention European stimulus attracts will determine the currency’s bearings.

British Pound Loses Ground Despite BoE Hold, Growth Upgrade

The BoE’s (Bank of England) rate decision offered up the opposite outcome to its Eurozone counterpart…and so did the pound. The sterling was down across the board Thursday despite the bank’s avoidance of any tactics to curb building yield expectations or weaken the currency. Fear / hope of a verbal intervention simply wasn’t that prolific. A mum policy group was followed by the August statement from the Exchequer. According to the financial authority, the UK economy was running at a far hotter pace than was expected back when March’s budget was released. The economy was seen growing 1.4 percent this year (previously 0.6) and 2.4 percent in 2014 (previously 1.8). This doesn’t, however, move forward the probability of the first rate hike. The sterling is still exuberant on yield expectations and is exposed to crushed carry dreams.

Japanese Yen: Timing Risk, Taxes, BoJ Stimulus

For other benchmark currencies, the fundamental risks are rather straightforward – the dollar has Taper and pound rate expectations. The yen is materially more complicated with a range of inevitable risks that can easily take the reins. The question is ‘when’? The outlook for a second round BoJ stimulus program before the April consumer tax hike is distant but a constant source of buoyancy. A possible risk trend drive is vague by can be set off at any time. Somewhere in the middle of both scale and timing is the January 1 capital gains tax hike. Though other programs and special circumstances surround this policy move, an index at multi-year highs is prone to fear.

Canadian Dollar Volatility as US and Canadian Jobs Data Due

The docket was a mixed one for Canada Thursday – and so was the loonie’s performance. On one hand, the Ivey business activity report for November tumbled sharply (53.7) while building permits jumped (7.4 percent). The big market mover comes Friday. Both US and Canadian jobs data will carry a short-term and lasting market affect. From NFPs we gauge risk trends and US growth hopes. Locally, it is BoC policy guidance.

Australian and New Zealand Dollars: Where is the Grab for Yield?

In a market that is reaching for whatever yield it can in order to make returns during a central bank-induced period of quiet, it is remarkable that both the New Zealand and Aussie dollar are underperforming. Currently, the rate outlook for the RBNZ (107 bps in 12 months) is the most hawkish in two years. Australian meanwhile is seeing its yield rising now. The 10-year Aussie yield is at an October 2011 high of 4.435 percent.

Gold May Hit a Three-Year Low if Traders Get a Whiff of Taper

As expected, gold would make little effort to upgrade its Wednesday rally into a lasting bull trend. With the European central bank meetings ahead of it at the time and now the November US payrolls, there is little room for speculators to fight prevailing trends with a chance that the Fed will see its Taper decision being made for it in key data. The low June close – the lowest in three years – is $1,200. We are little more than $25 off that level. If the market and financial press arrive at a Taper certainty after the jobs data, we may dive below this key level.**Bring the economic calendar to your charts with the DailyFX News App.

ECONOMIC DATA

GMT

Currency

Release

Survey

Previous

Comments

GBP

New Car Registrations (YoY) (NOV)

4.0%

5:00

JPY

Leading Index (OCT P)

109.8

109.2

5:00

JPY

Coincident Index (OCT P)

109.9

108.4

5:30

AUD

Foreign Reserves (Australian dollar) (NOV)

A$57.2B

The last print was the highest since 2007.

7:45

EUR

French Trade Balance (euros) (OCT)

-5300M

-5824M

7:45

EUR

French Central Government Balance (euros) (OCT)

-80.8B

8:00

CHF

Foreign Currency Reserves (NOV)

434.7B

Year over year CPI in Switzerland has not been positive since September of 2011.

8:15

CHF

Consumer Price Index (MoM) (NOV)

-0.2%

-0.1%

8:15

CHF

Consumer Price Index (YoY) (NOV)

-0.1%

-0.3%

8:15

CHF

Consumer Price Index- EU Harmonized (MoM) (NOV)

-0.1%

8:15

CHF

Consumer Price Index- EU Harmonized (YoY) (NOV)

0.0%

9:30

GBP

BoE/GfK Inflation 12-Month Forecast (NOV)

3.2%

11:00

EUR

German Factory Orders s.a. (MoM) (OCT)

-0.8%

3.3%

These are the highest year over year orders since mid-2011.

11:00

EUR

German Factory Orders n.s.a. (YoY) (OCT)

4.1%

7.9%

13:20

EUR

ECB's Joerg Asmussen Speaks on Euro Economy

13:30

CAD

Net Change in Employment (NOV)

7.5K

13.2K

U.S. NFPs will be the most important data print to end the week, if not the year. After stellar GDP, ADP and ISM data this past week, it will take a strong NFP number to spur speculation once more about a Federal Reserve taper. As this may be Bernanke’s last chance to reduce asset purchases before his departure, the FOMC rate decision in two weeks is crucial and somewhat dependent on a strong print here.

13:30

CAD

Unemployment Rate (NOV)

7.0%

6.9%

13:30

CAD

Full Time Employment Change (NOV)

16

13:30

CAD

Part Time Employment Change (NOV)

-2.7

13:30

CAD

Participation Rate (NOV)

66.4

13:30

CAD

Labor Productivity (QoQ) (3Q)

0.50%

13:30

USD

Change in Non-Farm Payrolls (NOV)

183K

204K

13:30

USD

Unemployment Rate (NOV)

7.2%

7.3%

13:30

USD

Labor Force Participation Rate (NOV)

62.8%

13:30

USD

Change in Private Payrolls (NOV)

175K

212K

13:30

USD

Change in Manufacturing Payrolls (NOV)

6K

19K

13:30

USD

Change in Household Employment (NOV)

-735

13:30

USD

Two-Month Payroll Net Revision (NOV)

--

--

13:30

USD

Average Hourly Earnings (MoM) (NOV)

0.20%

0.10%

13:30

USD

Average Hourly Earnings (YoY) (NOV)

2.00%

2.20%

13:30

USD

Average Weekly Hours (NOV)

34.5

34.4

13:30

USD

Underemployment Rate (NOV)

13.8%

13:30

USD

Personal Income (OCT)

0.3%

0.5%

13:30

USD

Personal Spending (OCT)

0.2%

0.2%

13:30

USD

PCE Deflator (MoM) (OCT)

0.0%

0.1%

13:30

USD

PCE Deflator (YoY) (OCT)

0.7%

0.9%

13:30

USD

Personal Consumption Expenditure Core (MoM) (OCT)

0.1%

0.1%

13:30

USD

Personal Consumption Expenditure Core (YoY) (OCT)

1.1%

1.2%

14:55

USD

U. of Michigan Confidence (DEC P)

75.1

20:00

USD

Consumer Credit (OCT)

$14.500B

$13.737B

GMT

Currency

Upcoming Events & Speeches

10:00

EUR

Bank of Italy Report on Balance-Sheet Aggregates

13:20

EUR

ECB's Joerg Asmussen Speaks on Euro Economy

15:15

USD

Fed's Plosser, Greenspan Speak at Philadelphia Fed Conference

20:00

USD

Fed's Charles Evans to Speak on U.S. Economy

SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table

  • CLASSIC SUPPORT AND RESISTANCE
EMERGING MARKETS 18:00 GMT

SCANDIES CURRENCIES 18:00 GMT

Currency

USD/MXN

USD/TRY

USD/ZAR

USD/HKD

USD/SGD

Currency

USD/SEK

USD/DKK

USD/NOK

Resist 2

13.4800

2.1000

10.7250

7.8165

1.3650

Resist 2

7.5800

5.8950

6.5135

Resist 1

13.2400

2.0850

10.5000

7.8075

1.3250

Resist 1

6.8155

5.8475

6.2660

Spot

13.1000

2.0360

10.4392

7.7542

1.2538

Spot

6.4942

5.4598

6.1523

Support 1

12.6000

1.9140

9.3700

7.7490

1.2000

Support 1

6.0800

5.3350

5.7450

Support 2

12.4200

1.9000

8.9500

7.7450

1.1800

Support 2

5.8085

5.2715

5.5655

  • INTRA-DAY PROBABILITY BANDS 18:00 GMT
\CCY

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

EUR/JPY

Gold

Res 3

1.3768

1.6452

103.05

0.9046

1.0734

0.9152

0.8294

140.82

1253.96

Res 2

1.3742

1.6421

102.77

0.9027

1.0714

0.9128

0.8270

140.44

1246.97

Res 1

1.3716

1.6390

102.50

0.9008

1.0695

0.9104

0.8246

140.05

1239.99

Spot

1.3663

1.6329

101.94

0.8970

1.0656

0.9055

0.8198

139.28

1226.01

Supp 1

1.3610

1.6268

101.38

0.8932

1.0617

0.9006

0.8150

138.51

1212.03

Supp 2

1.3584

1.6237

101.11

0.8913

1.0598

0.8982

0.8126

138.12

1246.97

Supp 3

1.3558

1.6206

100.83

0.8894

1.0578

0.8958

0.8102

137.74

1253.96

v



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