Ugly Canadian employment data knocks CAD for steep losses initially but risk attempts comeback after NY open.
MAJOR HEADLINES – PREVIOUS SESSION
- Australia Oct. AiG Performance of Construction Index out at 50.9 vs. 50.8 in Sep.
- apan Sep. Leading/Coincident Index out at 86.4/92.5 vs. 86.2/92.5 expected
- Switzerland Oct. Unemployment Rate (NSA) rose to 4.0% as expected and vs. 3.9% in Sep.
- Norway Sep. Industrial Production rose 0.9% MoM
- Norway Sep. Industrial Product Manufacturing rose 2.2% MoM vs. 0.4% expected
- UK Oct. PPI Input rose 2.6% MoM and +0.1% YoY vs. +1.5%/-1.3% expected, respectively
- UK Oct. PPI Output rose 0.2% MoM and 1.7% YoY vs. +0.3%/1.9% expected, respectively
- Germany Sep. Factory Orders rose +0.9% Mom and fell -13.1% YoY vs. +1.0%/-13.6% expected, respectively
- Canada Oct. Unemployment Rate rose to 8.6% vs. 8.5% expected and 8.4% in Sep.
- Canada Oct. Net Change in Employment fell -43.2k vs. +10k expected
- US Oct. Change in Nonfarm Payrolls out at -190k vs. -175k expected and -219k in Sep.
- US Oct. Unemployment Rate rose to 10.2% vs. 9.9% expected and 9.8% in Sep.
- US Oct. Average Hourly Earnings rose 0.3% vs. 0.1% expected
- US Oct. Average Weekly Hours steady at 33.0 vs. 33.1 expected
- US Sep. Wholesale Inventories fell -0.9% MoM vs. -1.0% expected
THEMES TO WATCH – UPCOMING SESSION
(All times GMT)
- US Treasury's Krueger to Speak (1800)
- US Sep. Consumer Credit (2000)
- Australia Sep. Home Loans (0030)
- Australia RBA's Lowe to Speak (0320)
- G-20 meeting this weekend
Market Comments:
The US payrolls data on the headline was slightly worse than expected, but the combination with previous month's revision (revised -263k to -219k for a +44k upward revision) actually makes the number slightly better than expected. The unemployment rate stole the headlines though, as the rate shot 0.4% higher to 10.2%, the first time the official tally has topped 10% since the 1982-3 time frame, when the rate was above 10% for 10 months. As we have discussed before, however, the real un- and underemployment situation this time around is far worse due to the changing nature of the work force, more temping, more "self-employed" who are only finding odd jobs and working part time, etc. It was also disappointing for the prospect of an imminent improvement in employment to see the Average Weekly Hour data remaining at the all time low of 33.0 hours/week rather than ticking higher. Still, as long as the decline rate in initial jobless claims continues at the current rate, we might look out for a topping of the unemployment cycle in a few months time.
The initial reaction by the market actually made sense for once, as traders failed to find the data especially inspiring for risk, but at equities opened for trade in New York, it appears that the risk perma-bulls are trying to mount a charge and bonds have reversed sharply lower after an initial rally, suggesting that the pressure on JPY crosses will be to the upside if they can't find support. We prefer a stronger JPY if we have a look over at the EURJPY chart, but the bond market is providing a bit of the challenge to that view so far today
More hawkishness from the RBA
AUD, one of the more risk-sensitive currencies, has traded to a new high for the week after the RBA raised its GDP forecasts sharply (2010 growth projected at 3.25% vs. previous 2.25%) overnight. Inflation was forecast at a relatively modest 2.25% for 2010 and 2.5% (vs. 2% previously) for 2011 and 2012. The RBA said that rates will be raised gradually. We also have to remember the RBA's recent words cautioning the market that currency strength was becoming a big enough factor that it could affect the trajectory of rates. The front end of the Australian curve has ticked higher on this news, but not as high as the AUDUSD has rallied. AUD was also boosted by the RBA comment that China investment is Australia is bigger than Australia Bureau of Statistics figures suggest.
More hawkishness from the RBA
AUD, one of the more risk-sensitive currencies, has traded to a new high for the week after the RBA raised its GDP forecasts sharply (2010 growth projected at 3.25% vs. previous 2.25%) overnight. Inflation was forecast at a relatively modest 2.25% for 2010 and 2.5% (vs. 2% previously) for 2011 and 2012. The RBA said that rates will be raised gradually. We also have to remember the RBA's recent words cautioning the market that currency strength was becoming a big enough factor that it could affect the trajectory of rates. The front end of the Australian curve has ticked higher on this news, but not as high as the AUDUSD has rallied. AUD was also boosted by the RBA comment that China investment is Australia is bigger than Australia Bureau of Statistics figures suggest.
CAD unemployment
CAD is struggling for direction as the rally in risk appetite after the US open is trying to pull it stronger after a terrible Canadian employment report earlier this morning suggests that the Canadian job market is still looking for a bottom.
CAD is struggling for direction as the rally in risk appetite after the US open is trying to pull it stronger after a terrible Canadian employment report earlier this morning suggests that the Canadian job market is still looking for a bottom.
Chart: EURUSD
We discussed the weekly pivots earlier this week as key for the USD this week, and EURUSD, since crossing above the 1.4825 area pivot on Wednesday, has twice found support in that area, including today. Meanwhile, the recent sell-off wave back below the old high offers a wave setup in which bears are looking for resistance to come in at the usual Fibo level suspects at market turnarounds (the 0.618 and 0.764, with the latter having been a very interesting level in past market cycles for EURUSD). That 0.764 retracement comes in at around 1.4960 if this 1.4895 area 0.618 Fibo can't hold back the rally. Failure of the 0 .764 level to hold would suggest a full retest of 1.5063 high and perhaps beyond if risk continues to rally and equities take out their recent highs.
We discussed the weekly pivots earlier this week as key for the USD this week, and EURUSD, since crossing above the 1.4825 area pivot on Wednesday, has twice found support in that area, including today. Meanwhile, the recent sell-off wave back below the old high offers a wave setup in which bears are looking for resistance to come in at the usual Fibo level suspects at market turnarounds (the 0.618 and 0.764, with the latter having been a very interesting level in past market cycles for EURUSD). That 0.764 retracement comes in at around 1.4960 if this 1.4895 area 0.618 Fibo can't hold back the rally. Failure of the 0 .764 level to hold would suggest a full retest of 1.5063 high and perhaps beyond if risk continues to rally and equities take out their recent highs.
