Daily Report: Focus on Non-Farm Payroll

Market Overview | Written by ActionForex.com | Nov 07 08 07:48 GMT |

Dollar and yen strengthens mildly overnight on weakness in US stock markets but no follow through buying is seen in the Asian session today. Markets are holding their bets ahead of the highly anticipated Non-Farm Payroll report. Economists expect the job market in the US to contract for the tenth consecutive months in Oct and the contraction is accelerating with -200k drop in payrolls. Unemployment rate is expected to climb to a five year high of 6.3%. There are many reasons to expect an even worse NFP number today. ADP report has already disappointed the markets by showing -157k drop in private payroll. Employment component of both ISM indices were deep in contraction region. Challenger layoffs rose to a 5 year high of 79%. Initial claims were elevated above 470k while continuing claims reached five year high. These are known facts and hence even if the NFP number is worse than expected, there may not be much impact to the markets if it's not too far off. Instead, the mover could indeed be the unemployment rate. Technically speaking, the forex markets are still lacking a clear direction. Though, this week's development argues that we may have seen the bottom of the pullback in dollar and yen. Stock markets development is still the main driver in FX. Since we're expecting DOW to head lower to test the lower side of recent range of 7884/8440, more upside is still in favor in dollar and yen in near term. Another piece of important data to watch will be Canadian job report which is expected to show -10k contraction in Oct. Unemployment rate is expected to climb from 6.1% to 6.2%. USD/CAD's break of 1.1892/1900 resistance suggests that correction from 1.3015 has completed already. A weaker than expected job number today will support this near term bullish view and encourage a rally in USD/CAD through 1.2375 near term resistance. Data released today so far saw Swiss unemployment rate rose from 2.4% to 2.5% in Oct. Germany Trade surplus cam in at 13.7b. Germany industrial production, US pending home sales and wholesale inventories will be featured. More on NFP: How Much Does the US Dollar Forecast Depend on US Non-Farm Payrolls (NFPs)? Why October Non-Farm Payrolls Could Fall by -300K U.S. Non-Farm Payrolls on Tap - Will the Dollar Reverse Course? AUD/USD Daily Outlook Daily Pivots: (S1) 0.6559; (P) 0.6730; (R1) 0.6824; More As discussed before, AUD/USD's rebound from 0.6008 could have already completed at 0.7014 already. 4 hours MACD's turn negative adds some more credence to this case too. Break of 0.6549 minor support will confirm and bring retest of 0.6008 low. On the upside, though, above 0.7014 will indicate that rise from 0.6008 is still in progress for 38.2% retracement of 0.9849 to 0.6008 at 0.7475. In the bigger picture, the strong rebound from 0.6008 indicates that whole fall from 0.9849 has likely completed the five wave sequence already, with the fifth wave ended at 0.6008, ahead of 76.4% retracement of 0.4773 to 0.9849 at 0.5971. Stronger rebound could be seen to 38.2% retracement of 0.9849 to 0.6008 at 0.7475 or above. Nevertheless, note that the impulsive nature of the fall from 0.9849 to 0.6008 indicate that price actions from 0.6008 is developing into correction/consolidation in a larger down trend only. The long term down trend is still expected to resume after completing the consolidation. On the downside, sustained break of 0.6008 will indicate that the down trend from 0.9849 has resumed for at least another five wave medium term decline. Forex News Digest The Day Ahead Canada and US: US Nonfarm Payrolls, Unemployment, Pending Home Sales The Day Ahead Europe and UK: GE Trade Balance, Current Account, Industrial Production U.S. Preview: Economists Say Pending Home Sales Data Could be Misleading Bank of South Korea Cuts 25 Basis Points to 4.00% As Expected Bank of Japan Pressured Into Rate Cut, Sakakibara Says In Interview Japan's Finance Minister Says Bank Capital Rules Will Be Relaxed Until 2012 Thursday's News Recap: Downbeat U.S. Data Cause Second Day of Equity Selloff Closing Market Recap: Worst Two-Day Rout on U.S. Stocks Since 1987 Dollar Falls on Speculation Jobs Report to Support Case for Fed Rate Cut Sakakibara Says Yen May Reach 80 per Dollar, Strong Currency to Aid Japan Global Money Rates Fall on Central Bank Cash Infusions, Interest-Rate Cuts U.S. Jobless Rate Probably Hit Five-Year High as Obama Inherits Downturn Euro May Fall 8 Percent Against Yen on Technical Charts, RBC Capital Says Zero-Interest-Rate World May Be Ahead as King, Trichet Take Axe to Rates Australia, New Zealand Dollars Slide on Global Growth Concerns, Stock Rout Sell Australia's Dollar as Global Slump Signals Drop, Morgan Stanley Says More Forex News Economic Indicators Update GMT Ccy Events Actual Consensus Previous Revised 6:45 CHF Swiss Jobless rate Oct 2.50% 2.50% 2.40% 7:00 EUR Germany Trade balance (euro) Sep 13.7B 13.7B 13.1B 7:00 EUR Germany Current account Sep 15.0B 10.3B 7.3B 7.5B 7:00 EUR Germany Export M/M Sep 0.70% 0.40% -0.50% -0.30% 7:00 EUR Germany Import M/M Sep 0.90% -1.40% -2.50% -2.70% 11:00 EUR Germany Industrial prod'n M/M Sep -2.00% 3.40% 11:00 EUR Germany Industrial prod'n Y/Y Sep -0.50% 1.70% 12:00 CAD Canada Unemployment rate Oct 6.20% 6.10% 12:00 CAD Canada Jobs change Oct -10.0K 106.9K 13:30 USD U.S. Non-farm payrolls Oct -200.0K -159.0K 13:30 USD U.S. Unemployment rate Oct 6.30% 6.10% 13:30 USD U.S. Avg. hourly earnings M/M Oct 0.20% 0.20% 13:30 USD U.S. Avg. hourly earnings Y/Y Oct 3.50% 3.40% 15:00 USD U.S. Pending home sales Sep N/A 93.4M 15:00 USD U.S. Pending home sales M/M Sep -3.00% 7.40% 15:00 USD U.S. Wholesale inventories Sep 0.30% 0.80%