Mid-Day Report: US Unemployment Rate Surged to 5 Year High, Markets Volatile

Market Overview | Written by ActionForex.com | Sep 05 08 13:15 GMT |

Unemployment rate in US surged sharply from 5.7% to 6.1% in Aug, much worse than expectation of 5.7% and is the highest reading since Sep 2003. Job market showed -84k contraction versus expectation of -75k. Prior month's fall was also revised down from -51k to -60k. Initial reactions to the data are wild which saw USD/JPY and AUD/USD dive to new session low but the actions are so far limited. EUR/USD attempts a bounce but was limited but Euro's weakness in crosses. Overall outlook in the markets remains unchanged and further downside is still in favor in EUR/USD, GBP/USD, USD/JPY, AUD/USD, EUR/JPY and GBP/JPY. Some clearer actions are seen in the USD/CAD considering stronger than expected Canadian job report. The Canadian Economy added 15.2k jobs in Aug, stronger than consensus of 8.0K. Unemployment rate was unchanged at 6.1%, better than expected of 6.2%. USD/CAD's consolidation from 1.0776 is still in progress and could have another dip to test 1.0541 support before completion. Other data released earlier saw Germany industrial production dropped more than expected by -1.8% mom, -0.6% yoy in Jul. Japanese Business Capex dropped -6.5% in Q1 versus expectation of 2.5% rise. USD/CAD Mid-Day Outlook Daily Pivots: (S1) 1.0590; (P) 1.0644; (R1) 1.0749; More. USD/CAD weakens after in early US session as consolidation from 1.0776 is still in progress. More choppy sideway trading could still be seen below 1.0776 with risk of another fall for 1.0410 cluster support remains. Nevertheless, as long as 1.0410 cluster support (38.2% retracement of 0.9823 to 1.0776 at 1.0412), support holds, recent rally should still be in force and further rise is still in favor after completing consolidation. However, considering that 1.0791/98 is almost met, break of 1.0410 will indicate that whole rally from 0.9823 has completed with five waves up to 1.0776 with bearish divergence condition in 4 hours MACD and RSI. In the bigger picture, medium term rise from 0.9056 is still in progress towards mentioned cluster resistance at 1.0791/98 (61.8% retracement of 1.1874 to 0.9056 at 1.0798, 61.8% projection of 0.9056 to 1.0378 from 0.9974 at 1.0791) first. Sustained break of 1.0791/98 will argue that rise from 0.9056 is probably more than just a correction in the long term down trend and will set the stage to test key long term resistance at 1.1874. However, break of 0.9974 support will indicate that whole medium term rise from 0.9056 has already finished. The three wave structure will indicate that it's just a correction in the long term down trend and much deeper decline could then be seen to retest 0.9056 low.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
23:50	JPY	Japan Business capex Q1	-6.50%	2.50%	-4.90%
10:00	EUR	Germany Industrial prod'n M/M Jul	-1.80%	-0.50%	0.20%	0.10%
10:00	EUR	Germany Industrial prod'n Y/Y Jul	-0.60%	0.80%	1.70%	1.50%
11:00	CAD	Canada Net change in employment Aug	15.2K	8.0K	-55.20K
11:00	CAD	Canada Unemployment rate Aug	6.10%	6.20%	6.10%
12:30	USD	U.S. Non-farm payrolls Aug	-84K	-75.0K	-51.0K	-60K
12:30	USD	U.S. Unemployment rate Aug	6.10%	5.70%	5.70%
12:30	USD	U.S. Avg. hourly earnings M/M Aug	0.40%	0.30%	0.30%
14:00	CAD	Canada Ivey PMI Aug		62.5	65.5