- Dollar Wavers ahead of NFPs, Is Volatility Guaranteed?
- Euro Rallies after Trichet Leaves Door Open for Further Hikes, Helps Portugal
- British Pound Staid Through BoE Rate Decision, A Poor Reflection on the ECB
- Canadian Dollar Traders Await Employment Data, Then NFPs
- Australian Dollar Starts with Employment, Ends with Risk Trends
- Swiss Franc Sinks Across the Board on Euro Rebound
- Gold Salvages a Fourth Consecutive Advance Though Momentum Flagging
Dollar Wavers ahead of NFPs, Is Volatility Guaranteed?
Though there is notable event risk ahead for the US dollar (namely, the June payroll numbers); the currency hasn’t been in command of its own volatility and bearings over the past 24 hours. In the previous session, the impact of the ECB rate decision spilled over to the greenback; while a surprise jump in the ADP private payrolls stoked risk appetite trends. This broader scope is the same approach we need to take heading into the monthly NFP report. While a simple, academic approach would have it that a jump in the number of jobs should lead to an equivalent rally for the benchmark currency, the markets don’t operate under such a rudimentary model. But, before we break down the scenarios for the employment data, it is important to take stock of market conditions heading into the storm.
Thursday’s performance was mixed for the dollar – with gains against its fellow safe haven currencies (the franc, yen) and the pound; while the euro and commodity currencies (Canadian, Australian and New Zealand dollars) posted meaningful gains. This mix speaks to the influence that risk trends currently have over the FX market – an important consideration for an indicator that has a proven track record for stirring investor sentiment. On the other hand, we find that the dollar is not positioned for any major trends. The Dow Jones FXCM Dollar Index (ticker = USDollar) has retraced nearly half the losses it tallied last week through Thursday’s close and now finds itself in the middle of the past three months’ range. Amongst the majors, EURUSD is hovering in the middle of a multi-month wedge, USDJPY has fallen short of a 200-pip range in the span of a month and USDCHF has lost all momentum since hitting its record low in June. Therefore, it will be difficult to spark a new trend (bullish or bearish) for the dollar under these fundamental conditions and considering we are quickly heading into the weekend.
Setting the stage for the NFPs’ reaction, the Bloomberg consensus forecast calls for a 105,000 net increase in US payrolls while the jobless rate is seen holding at 9.1 percent. This relatively moderate outcome would be supported by the steady employment components of the ISM service and manufacturing surveys as well as the initial jobless claims figures (which shows a remarkable inverse correlation to the monthly payroll report). It is the more contentious ADP private payrolls report that really draws the market’s attention though. The 157,000 figure was more than twice the forecast; and many consider this a clear indicator that the consensus for the government report has been set to low. It is perhaps this adjustment that is reflect in the S&P 500’s climb through this past session and the subsequent pullback for the dollar. Putting this particular indicator into context, one monthly payrolls report won’t significantly alter general labor conditions and therefore the Fed’s policy approach. Yield is still the dollar’s biggest roadblock to meaningful gains. Interest rates are completely off the table; but short-term market rates (Libor, Treasuries) can still boost the dollar’s appeal. Knowing this, we shouldn’t expect more than a short-term volatility impact from Friday’s data.
Euro Rallies after Trichet Leaves Door Open for Further Hikes, Helps Portugal
There was no surprise in the ECB’s announcement that it would be raising the region’s benchmark lending rate 25 basis points (bps) to 1.50 percent. The real debate rested with what central bank President Trichet would let slip at his press conference. The market is adept at processing the nuance of this policy officials’ rhetoric as a guide for conviction and timing for future policy changes. Without the phrase “strong vigilance”, the market deems it unlikely that there will be another hike in August; but September is still on the table given their reflection of accommodation. An expected (but still jarring) step, Trichet also announced that minimum credit standards have been dropped for Portugal.
British Pound Staid Through BoE Rate Decision, A Poor Reflection on the ECB
Though there was a Bank of England rate decision, the bigger fundamental impact would come through a report of the biggest jump in manufacturing output in 14 months. Unlike its Euro Zone counterpart, the BoE does not offer explanation or expectations when policy is held unchanged – rendering the event impotent. That said, the draw of a higher European yield does work to direct capital away from the UK.
Canadian Dollar Traders Await Employment Data, Then NFPs
Once again, we come to the Friday of the month where both Canada’s and the United States’ employment data is due. History shows us that the reaction to the Canadian data (11:00 GMT) is blunted by the embargo on volatility ahead of the US release (12:30 GMT). For the biggest move for the Canadian dollar, it is best to see both countries’ data align – as US performance dictates trade health between the two.
Australian Dollar Starts with Employment, Ends with Risk Trends
Through the opening of Thursday’s session, the Australian dollar fought off tentative, bearish retracements by printing a remarkable 59,000 increase in full-time jobs. What kept the currency buoyant though through the rest of the day was the momentum behind risk appetite. If the Aussie dollar is to extend its advance into the weekend, we should look for a positive NFP reading that spurs the S&P 500 higher.
Swiss Franc Sinks Across the Board on Euro Rebound
If we were looking at EURCHF alone, the catalyst for direction would be pretty clear (the ECB rate decision). However, if we take a look at USDCHF, we start to see the nuance for the franc. The currency began sliding early in the European session after a disappointing 0.6 percent reading from June CPI – curbing rate potential. However, it did gain back ground against the dollar when the ECB boosted ‘European’ returns.
Gold Salvages a Fourth Consecutive Advance Though Momentum Flagging
Gold has put in for its most consistent run in nearly three months with a fourth consecutive bullish close through Thursday. The push higher is certainly helped by the negative reaction from the dollar to risk trends as well as the ongoing debate over the US debt ceiling. Yet, momentum is clearly flagging; and the hike to the euro’s benchmark rate lifts the relative value of currencies to this non-yielding metal.
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ECONOMIC DATA
Next 24 Hours
|
GMT |
Currency |
Release |
Survey |
Previous |
Comments |
|
2:00 |
CNY |
Entrepreneur Confidence Index (2Q) |
137.4 |
Has steadily trended lower as Central Bank tightening stifles investment |
|
|
2:00 |
CNY |
Business Climate Index (2Q) |
133.8 |
||
|
4:30 |
JPY |
Bankruptcies (YoY) (JUN) |
4.9% |
Increased dramatically since earthquake |
|
|
5:00 |
JPY |
Eco Watchers Survey: Current (JUN) |
40 |
36 |
Improvement in outlook most likely from boost of spending for recovery |
|
5:00 |
JPY |
Eco Watchers Survey: Outlook (JUN) |
46 |
44.9 |
|
|
5:45 |
CHF |
Unemployment Rate (JUN) |
2.8% |
2.9% |
Unemployment could show some signs of strong Franc hurting economy |
|
5:45 |
CHF |
Unemployment Rate s.a. (JUN) |
3.0% |
3.0% |
|
|
6:00 |
EUR |
German Exports s.a. (MoM) (MAY) |
1.5% |
-5.6% |
Increase in exports and imports after dismal fall last month suggests stronger manufacturing sector |
|
6:00 |
EUR |
German Imports s.a. (MoM) (MAY) |
1.5% |
-2.4% |
|
|
6:00 |
EUR |
German Current Account (euros) (MAY) |
7.0B |
8.8B |
|
|
6:00 |
EUR |
German Trade Balance (euros) (MAY) |
12.2B |
10.9B |
|
|
6:30 |
EUR |
Bank of France Business Sentiment (JUN) |
103 |
French domestic economy health still seen as tied to peripheral economy state |
|
|
6:45 |
EUR |
French Central Government Balance (euros) (MAY) |
-61.4B |
||
|
8:00 |
EUR |
Italian Industrial Production s.a. (MoM) (MAY) |
-0.1% |
1.0% |
Industrial production expected to fall as government cuts spending |
|
8:00 |
EUR |
Italian Industrial Production w.d.a. (YoY) (MAY) |
2.2% |
3.7% |
|
|
8:00 |
EUR |
Italian Industrial Production n.s.a. (YoY) (MAY) |
-0.1% |
||
|
8:30 |
GBP |
Producer Price Index Input n.s.a. (MoM) (JUN) |
-0.1% |
-2.0% |
British PPI expected to increase, may suggest direction of CPI but not expected to change current rate policy views of the Bank of England |
|
8:30 |
GBP |
Producer Price Index Input n.s.a. (YoY) (JUN) |
16.1% |
15.7% |
|
|
8:30 |
GBP |
Producer Price Index Output n.s.a. (MoM) (JUN) |
0.1% |
0.2% |
|
|
8:30 |
GBP |
Producer Price Index Output n.s.a. (YoY) (JUN) |
5.5% |
5.3% |
|
|
8:30 |
GBP |
PPI Output Core n.s.a. (MoM) (JUN) |
0.2% |
0.2% |
|
|
8:30 |
GBP |
PPI Output Core n.s.a. (YoY) (JUN) |
3.3% |
3.4% |
|
|
11:00 |
CAD |
Full Time Employment Change (JUN) |
32.9 |
Canadian labor markets are expected to slightly weaken as US economy slowed in June, cutting demand for Canadian goods |
|
|
11:00 |
CAD |
Net Change in Employment (JUN) |
15.0K |
22.3K |
|
|
11:00 |
CAD |
Participation Rate (JUN) |
66.9 |
||
|
11:00 |
CAD |
Part Time Employment Change (JUN) |
-10.6 |
||
|
11:00 |
CAD |
Unemployment Rate (JUN) |
7.4% |
7.4% |
|
|
12:30 |
USD |
Change in Non-farm Payrolls (JUN) |
105K |
54K |
US labor markets widely expected to improve following last month’s drop; ADP survey also points higher |
|
12:30 |
USD |
Change in Private Payrolls (JUN) |
125K |
83K |
|
|
12:30 |
USD |
Change in Manufacturing Payrolls (JUN) |
5K |
-5K |
|
|
12:30 |
USD |
Unemployment Rate (JUN) |
9.1% |
9.1% |
|
|
12:30 |
USD |
Avg Hourly Earnings (MoM) (JUN) |
0.2% |
0.3% |
Wages and work breakdown shows mild strengthening of US market, could still show slower recovery |
|
12:30 |
USD |
Avg Hourly Earnings (YoY) (JUN) |
1.9% |
1.8% |
|
|
12:30 |
USD |
Avg Weekly Hours All Employees (JUN) |
34.4 |
34.4 |
|
|
12:30 |
USD |
Chg in Household Survey Employment (JUN) |
105 |
||
|
14:00 |
USD |
Wholesale Inventories (MAY) |
0.6% |
0.8% |
May indicate slower investment |
|
19:00 |
USD |
Consumer Credit (MAY) |
$4.000B |
$6.247B |
Slowing credit may hurt economy |
SUPPORT AND RESISTANCE LEVELS
CLASSIC SUPPORT AND RESISTANCE – 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.5160 |
1.6600 |
89.00 |
0.9345 |
1.0275 |
1.1800 |
0.8400 |
122.00 |
146.05 |
|
Resist 1 |
1.5000 |
1.6300 |
86.00 |
0.8900 |
1.0000 |
1.1000 |
0.8300 |
118.00 |
140.00 |
|
Spot |
1.4353 |
1.5965 |
81.22 |
0.8445 |
0.9587 |
1.0772 |
0.8329 |
116.57 |
129.66 |
|
Support 1 |
1.4000 |
1.5935 |
80.00 |
0.8300 |
0.9500 |
1.0400 |
0.7745 |
113.80 |
125.00 |
|
Support 2 |
1.3700 |
1.5750 |
75.00 |
0.8250 |
0.9055 |
1.0200 |
0.6850 |
105.50 |
119.00 |
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
|
Currency |
USD/MXN |
USD/TRY |
USD/ZAR |
USD/HKD |
USD/SGD |
Currency |
USD/SEK |
USD/DKK |
USD/NOK |
|
Resist 2 |
13.8500 |
1.6575 |
7.4025 |
7.8165 |
1.3650 |
Resist 2 |
7.5800 |
5.6625 |
6.1150 |
|
Resist 1 |
12.5000 |
1.6300 |
7.3500 |
7.8075 |
1.3250 |
Resist 1 |
6.5175 |
5.3100 |
5.7075 |
|
Spot |
11.5492 |
1.6176 |
6.6723 |
7.7819 |
1.2225 |
Spot |
6.3210 |
5.1965 |
5.3820 |
|
Support 1 |
11.5200 |
1.5040 |
6.5575 |
7.7490 |
1.2145 |
Support 1 |
6.0800 |
5.1050 |
5.3040 |
|
Support 2 |
11.4400 |
1.4725 |
6.4295 |
7.7450 |
1.2000 |
Support 2 |
5.8085 |
4.9115 |
4.9410 |
INTRA-DAY PIVOT POINTS 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.4470 |
1.6050 |
81.75 |
0.8556 |
0.9706 |
1.0837 |
0.8380 |
117.58 |
130.66 |
|
Resist 1 |
1.4412 |
1.6007 |
81.49 |
0.8501 |
0.9646 |
1.0805 |
0.8355 |
117.08 |
130.16 |
|
Pivot |
1.4316 |
1.5976 |
81.14 |
0.8440 |
0.9608 |
1.0745 |
0.8305 |
116.30 |
129.62 |
|
Support 1 |
1.4258 |
1.5933 |
80.88 |
0.8385 |
0.9548 |
1.0713 |
0.8280 |
115.80 |
129.12 |
|
Support 2 |
1.4162 |
1.5902 |
80.53 |
0.8324 |
0.9510 |
1.0653 |
0.8230 |
115.02 |
128.58 |
INTRA-DAY PROBABILITY BANDS 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist. 3 |
1.4530 |
1.6118 |
82.01 |
0.8541 |
0.9674 |
1.0909 |
0.8439 |
118.08 |
131.12 |
|
Resist. 2 |
1.4486 |
1.6080 |
81.81 |
0.8517 |
0.9652 |
1.0874 |
0.8412 |
117.70 |
130.76 |
|
Resist. 1 |
1.4442 |
1.6042 |
81.61 |
0.8493 |
0.9630 |
1.0840 |
0.8384 |
117.33 |
130.39 |
|
Spot |
1.4353 |
1.5965 |
81.22 |
0.8445 |
0.9587 |
1.0772 |
0.8329 |
116.57 |
129.66 |
|
Support 1 |
1.4264 |
1.5888 |
80.83 |
0.8397 |
0.9544 |
1.0704 |
0.8274 |
115.81 |
128.93 |
|
Support 2 |
1.4220 |
1.5850 |
80.63 |
0.8373 |
0.9522 |
1.0670 |
0.8246 |
115.44 |
128.56 |
|
Support 3 |
1.4176 |
1.5812 |
80.43 |
0.8349 |
0.9500 |
1.0635 |
0.8219 |
115.06 |
128.20 |
v
Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com
To receive John’s reports via email or to submit Questions or Comments about an article; email jkicklighter@dailyfx.com
The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. Forex Capital Markets, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. Forex Capital Markets, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. Forex Capital Markets, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.
