- Dollar Marks a Critical Bearish Break Post-FOMC, What Impact will Friday’s NFPs Have?
- Japanese Yen Primed for a Significant Fundamental Trend as the BoJ Holds its Policy
- British Pound Rallies Following BoE Decision Despite a Lack of Actionable Commentary Thanks to Fed
- Euro Rallies as ECB Hold and Trichet’s Commentary Draws Stark Contrasts to Fed’s Dovish Bearish
- Australian Dollar Holds Firm Despite RBA’s CPI and GDP Downgrades in Quarterly Policy Statement
- Canadian Dollar Could Produce a Meaningful Breakout Against the Greenback on Jobs Data
Dollar Marks a Critical Bearish Break Post-FOMC, What Impact will Friday’s NFPs Have?
We didn’t need to dig into the fundamental currents for the day to know where the dollar was heading Thursday. With the S&P 500 rallying to two-year highs and gold pushing new records, it was pretty obvious that the greenback would in turn be under heavy selling pressure. In fact, the single currency was under significant duress. However, interestingly enough, the losses suffered by the dollar were far less severe than the relative gains tallied by the yield-centric and anti-fiat assets. The equities benchmark’s 1.9 percent advance marked a dramatic acceleration to its already consistent two-month bull trend in an effort to test levels last seen back in September 2008. Quickly becoming the favorite anti-dollar asset, gold leveraged its biggest single-day rally since January 2009 (3.3 percent) and came within sneezing distance of the $1,400 mark. And, as a sign of just how unusual conditions are for the greenback, even the active 10-year Treasury futures contract reported its biggest daily advance since June 4th to match highs last seen back in December of 2008. And, while the Dollar Index would not suffer as aggressive declines as its counterparts would imply, the currency nonetheless broke a rising trend of lows that traces all the back to the March 17th, 2008-swing multi-decade low.
By looking at the dollar by itself, we are able to discern relatively little other than it is under significant pressure. It is the contrast between the performance of the currency and the other major asset classes that really gives us a fundamental assessment of its troubles. In the wake of the FOMC’s decision to expand its stimulus efforts by an additional $600 billion Wednesday, market participants are trying to assess just how severe the damage is to the dollar via the naturally increase in money supply and the subsequent encouragement for speculative capital to flow out of the US system to seek out higher return elsewhere. From this elemental, supply-and-demand depreciation though it is difficult to separate the influence that risk appetite trends are having on the currency. This is a passive outflow of funds as investors continue to unwind safe-haven based positions that were denominated in dollar as well as an active hemorrhaging of speculative capital that simply wants to seek yield while avoiding inflation.
The risk component of the dollar’s decline is important to benchmark with Friday’s top event risk. It may seem that the October nonfarm payrolls report wouldn’t encourage much of a reaction from the dollar as the market is preoccupied with the drugging effects of easy leverage and risk guarantees through stimulus. Yet, if risk appetite is indeed responsible for the advance in capital markets and subsequent pressure on the greenback; then a significant shift in the employment figures could amplify or curb the impulse to feed high return positions. Looking at the consensus forecast, economists are calling for a 60,000-increase in net payrolls. This doesn’t seem at all out of reach when we consider the pre-crisis high from the ISM service sector activity report and the steady improvement in continuing jobless claims (barring the extended benefits figures). There is a good opportunity for surprise on either side here. And, turning our attention to concerns running a little further than this risk phase, we should take note of Standard & Poor’s and Fitch’s lowered outlooks for the US housing sector as well as the claims that the QE2 will have a diminishing margin for return. It is always good to look beyond the panic and euphoria of risk trends.
Related: Discuss the Dollar in the DailyFX Forum, John’s Analyst Picks: EURUSD More Appealing than GBPUSD, Long-Term USDJPY Shift
Japanese Yen Primed for a Significant Fundamental Trend as the BoJ Holds its Policy
In the past few months, the Bank of Japan has taken an increasingly aggressive stance in its effort to stimulus its economy and inflation. When the central bank announced that it would move up its November meeting to just a week after its October gathering, the market understandably took this shift to mean that the group was either looking to further define its unusual purchasing efforts and/or increase its overall program once again. However, in an unusually early release for the group, the unanimous decision to keep the asset purchasing fund at 5 trillion yen and credit loan program at 30 trillion yen would curb selling pressure on the yen. This is especially true given the contrast of the dollar.
British Pound Rallies Following BoE Decision Despite a Lack of Actionable Commentary Thanks to Fed
Between the two central banks scheduled to release its policy decision in the European hours Thursday; the Bank of England’s verdict held the greater implications for price action. Though a strong 3Q GDP reading would curtail speculation, there was a lingering belief that the central bank could add stimulus to offset poor growth forecasts. Now we wait for next week’s quarterly statement for forecasts to define stimulus potential.
Euro Rallies as ECB Hold and Trichet’s Commentary Draws Stark Contrasts to Fed’s Dovish Bearish
There was little margin for surprise in the ECB’s rate decision Thursday. The market was heavily pricing in the likelihood that the monetary authority would hold the benchmark rate unchanged at 1.00 percent. That was indeed the case. And, to further boost the euro’s appeal against the dollar, ECB President Trichet remarked that next month, the central bank would discuss means for withdrawing stimulus.
Australian Dollar Holds Firm Despite RBA’s CPI and GDP Downgrades in Quarterly Policy Statement
Not long ago, the RBA mildly surprised the market by hiking its benchmark lending rate to 4.75 percent. It seems that Aussie dollar is on a level all its own; and there is no visible limit to how consistent the policy group’s hikes will be. However, the bank’s quarterly policy report would give some room for conjecture. The group lowered both its inflation and 2011 GDP forecasts. It’s a first but mild step for seeding doubt.
Canadian Dollar Could Produce a Meaningful Breakout Against the Greenback on Jobs Data
As usual, the Canadian employment data is scheduled for release on the same day as the US statistics. And, even though the NFPs may have a limited impact on exuberant risk trends; the threat of volatility later in the day could still dampen reaction to the Canadian data. That said, with USDCAD on the verge of a significant breakout, a significant enough surprise could lead to a meaningful move.
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ECONOMIC DATA
Next 24 Hours
|
Currency |
GMT |
Release |
Survey |
Previous |
Comments |
|
AUD |
22:30 |
AiG Performance of Construction Index (OCT) |
40.8 |
Declined in the last five months. |
|
|
JPY |
Bank of Japan Interest Rate Decision |
0.10% |
Market implies -9% chance of hike. |
||
|
AUD |
5:30 |
Foreign Reserves (Australian dollar) (OCT) |
42.8B |
Reserves increased slightly in Sept. |
|
|
GBP |
9:30 |
Producer Price Index Input n.s.a. (MoM) (OCT) |
0.9% |
0.7% |
U.K. producer prices increased more than economists forecast in September as raw-material costs jumped 0.7%, feeding inflation into the broader economy. |
|
GBP |
9:30 |
Producer Price Index Input n.s.a. (YoY) (OCT) |
7.3% |
9.5% |
|
|
GBP |
9:30 |
Producer Price Index Output n.s.a. (MoM) (OCT) |
0.3% |
0.3% |
|
|
GBP |
9:30 |
Producer Price Index Output n.s.a. (YoY) (OCT) |
4.4% |
4.4% |
|
|
GBP |
9:30 |
PPI Output Core n.s.a. (MoM) (OCT) |
0.2% |
0.4% |
|
|
GBP |
9:30 |
PPI Output Core n.s.a. (YoY) (OCT) |
4.4% |
4.6% |
|
|
EUR |
10:00 |
Euro-Zone Retail Sales (MoM) (SEP) |
0.1% |
-0.2% |
Retail sales declined in August for the first time in four months. |
|
EUR |
10:00 |
Euro-Zone Retail Sales (YoY) (SEP) |
1.4% |
1.3% |
|
|
EUR |
10:00 |
German Factory Orders s.a. (MoM) (SEP) |
0.4% |
3.4% |
Factory orders rose in August, led by demand for investment goods. |
|
EUR |
10:00 |
German Factory Orders n.s.a. (YoY) (SEP) |
19.0% |
20.3% |
|
|
CAD |
11:00 |
Net Change in Employment (OCT) |
15.0K |
-6.6K |
Canadian employers unexpectedly cut 6,600 jobs in September, although the unemployment rate fell to 8.0% as people left the workforce. |
|
CAD |
11:00 |
Unemployment Rate (OCT) |
8.0% |
8.0% |
|
|
CAD |
11:00 |
Full Time Employment Change (OCT) |
30 |
37.1 |
|
|
CAD |
11:00 |
Part Time Employment Change (OCT) |
-12.0 |
-43.7 |
|
|
CAD |
11:00 |
Participation Rate (OCT) |
67.3 |
67.3 |
|
|
CAD |
12:30 |
Building Permits (MoM) (SEP) |
2.5% |
-9.2% |
October decline largest since 2009. |
|
USD |
12:30 |
Change in Non-Farm Payrolls (OCT) |
60K |
-95K |
U.S. nonfarm payrolls declined in September for a fourth consecutive month as the unemployment rate held at 9.6%. |
|
USD |
12:30 |
Unemployment Rate (OCT) |
9.6% |
9.6% |
|
|
USD |
12:30 |
Change in Private Payrolls (OCT) |
80K |
64K |
|
|
USD |
12:30 |
Change in Manufacturing Payrolls (OCT) |
-7K |
-6K |
|
|
USD |
12:30 |
Average Hourly Earnings (MoM) (OCT) |
0.2% |
0.0% |
Average hourly earnings were unchanged in September after rising in four of the prior five months. |
|
USD |
12:30 |
Average Hourly Earnings (YoY) (OCT) |
1.6% |
1.7% |
|
|
USD |
12:30 |
Average Weekly Hours (OCT) |
34.2 |
34.2 |
|
|
USD |
14:00 |
Pending Home Sales (MoM) (SEP) |
3.0% |
4.3% |
Pending home sales likely rose in September for a third month. |
|
USD |
14:00 |
Pending Home Sales (YoY) (SEP) |
-18.4% |
||
|
USD |
19:00 |
Consumer Credit (SEP) |
-$3.0B |
-$3.3B |
Declined in the last seven months. |
|
Currency |
GMT |
Upcoming Events & Speeches |
|
AUD |
0:30 |
Reserve Bank of Australia Quarterly Monetary Policy Statement |
|
USD |
12:30 |
Fed’s Charles Plosser Moderates Panel at Atlanta Fed Conference |
|
USD |
13:30 |
Fed’s Thomas Hoenig Speaks on Economy |
|
USD |
15:15 |
Fed’s Richard Fisher Moderates Panel at Atlanta Fed Conference |
|
USD |
17:20 |
Fed’s James Bullard Moderates Panel at Atlanta Fed Conference |
|
USD |
18:00 |
Fed Chairman Ben Bernanke Speaks on Economy |
|
USD |
20:15 |
Fed’s Jeffrey Lacker Moderates Panel at Atlanta Fed Conference |
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 |
1.4800 |
1.6715 |
89.00 |
1.0460 |
1.0922 |
1.0600 |
0.8230 |
127.60 |
146.05 |
|
Resist 1 |
1.4450 |
1.6420 |
86.00 |
0.9950 |
1.0750 |
1.0200 |
0.8000 |
120.00 |
140.00 |
|
Spot |
1.4220 |
1.6288 |
80.74 |
0.9581 |
1.0025 |
1.0175 |
0.7963 |
114.81 |
131.51 |
|
Support 1 |
1.3700 |
1.5650 |
80.00 |
0.9500 |
0.9950 |
0.9640 |
0.6850 |
103.80 |
125.00 |
|
Support 2 |
1.3500 |
1.5500 |
75.00 |
0.9000 |
0.9700 |
0.9375 |
0.6585 |
100.00 |
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 |
14.4500 |
1.6755 |
8.7915 |
7.8165 |
1.4945 |
Resist 2 |
7.7500 |
5.7800 |
6.2750 |
|
Resist 1 |
13.8500 |
1.4865 |
8.3675 |
7.8075 |
1.4655 |
Resist 1 |
7.5800 |
5.5400 |
6.1150 |
|
Spot |
12.2238 |
1.3938 |
6.7878 |
7.7508 |
1.2824 |
Spot |
6.5117 |
5.2422 |
5.7328 |
|
Support 1 |
12.0500 |
1.3665 |
6.6950 |
7.7490 |
1.2750 |
Support 1 |
6.4500 |
5.2625 |
5.7030 |
|
Support 2 |
11.7200 |
1.3475 |
6.4300 |
7.7450 |
1.2500 |
Support 2 |
6.1250 |
5.1000 |
5.5200 |
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 |
1.4381 |
1.6441 |
81.48 |
0.9798 |
1.0164 |
1.0280 |
0.8102 |
116.13 |
132.46 |
|
Resist 1 |
1.4300 |
1.6365 |
81.11 |
0.9690 |
1.0095 |
1.0227 |
0.8032 |
115.47 |
131.98 |
|
Pivot |
1.4202 |
1.6222 |
80.85 |
0.9629 |
1.0052 |
1.0125 |
0.7907 |
114.76 |
131.06 |
|
Support 1 |
1.4121 |
1.6146 |
80.48 |
0.9521 |
0.9983 |
1.0072 |
0.7837 |
114.10 |
130.58 |
|
Support 2 |
1.4023 |
1.6003 |
80.22 |
0.9460 |
0.9940 |
0.9970 |
0.7712 |
113.39 |
129.66 |
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 |
1.4412 |
1.6478 |
81.70 |
0.9704 |
1.0147 |
1.0328 |
0.8081 |
116.41 |
133.39 |
|
Resist. 2 |
1.4364 |
1.6430 |
81.46 |
0.9673 |
1.0116 |
1.0290 |
0.8052 |
116.01 |
132.92 |
|
Resist. 1 |
1.4316 |
1.6383 |
81.22 |
0.9642 |
1.0086 |
1.0251 |
0.8022 |
115.61 |
132.45 |
|
Spot |
1.4220 |
1.6288 |
80.74 |
0.9581 |
1.0025 |
1.0175 |
0.7963 |
114.81 |
131.51 |
|
Support 1 |
1.4124 |
1.6193 |
80.26 |
0.9520 |
0.9964 |
1.0099 |
0.7904 |
114.01 |
130.57 |
|
Support 2 |
1.4076 |
1.6146 |
80.02 |
0.9489 |
0.9934 |
1.0060 |
0.7874 |
113.61 |
130.10 |
|
Support 3 |
1.4028 |
1.6098 |
79.78 |
0.9458 |
0.9903 |
1.0022 |
0.7845 |
113.21 |
129.63 |
v
Written by: John Kicklighter, 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
http://www.surveymonkey.com/s/WT6MCGL
