US Morning Notes - USD mixed, Canada’s unemployment rate rises to 8.6%

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FX Highlights

• The USD is trading mixed as yesterday’s strong stock market gains had little impact on the Forex market, AUD is supported by RBA policy statement which states that interest rates will need to gradually rise, the RBA also raised its growth and inflation forecasts, Swiss unemployment comes in better than expected, UK output prices rise, German industrial orders rise more than expected, CAD trades lower as Canada posts an unexpected loss of jobs in October and higher unemployment, USD price direction hinges is on whether today’s US unemployment report contributes to continuation of risk appetite
• Focus turns to today’s release of US unemployment, wholesale sales and consumer credit
• Canada’s October unemployment rate rose to 8.6% from 8.4%, Canada unexpectedly lost 43,200k jobs in October, CAD lower
• Japan’s September leading indicator rose 3.2 points, coincident indicator rose 1.3, JPY higher
• RBA says further gradual rise in interest rates needed, RBA lifts growth forecast to 3.25% next year with inflation at 2.25%, October construction activity rose to 50.9, AUD higher
• German September industrial orders rise 0.9%, ECB’s Nowontny says FX rates are risks to economic development, EUR lower
• UK October output prices rose 0.2% and input prices rise 2.6%, GBP higher
• Swiss October unemployment was unchanged at 4.1%, CHF mixed
• Canadian manufacturers see the worst of the recession over but expressed concern that strong CAD is a hindrance to recovery, Canada’s Financial Minister Flaherty says he expects to see more job weakness until the economic recovery takes hold
• The Senate voted to extend jobless benefits for 14 weeks and the 8k tax credit for home buyers until April 30th 2010
• US equity markets set to open flat, European equities mixed, Nikkei closed 72 points higher

Upcoming Events

• US - Friday, October unemployment and non-farm payrolls will be released with unemployment expected to rise 0.1% to 9.9% with nfp at -175k, along with September wholesale sales expected at 0.6% and September consumer credit expected at -10bln
• CAN - Friday, October unemployment will be released expected at 8.5% compared to 8.4% with jobs growth at 10k (already released)

EU Morning Report – Asian stocks higher on upbeat data from the US and Australia

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Stocks in Asia rise following upbeat data from the US and Australia.

• Australia’s central bank said the economy will expand at more than three times the pace forecast in August, and signaled it will continue to lead the world in raising interest rates.  The Aussie climbed against almost all of its major counterparts.  Yesterday in the US, the Dow Jones Industrial average climbed 2.1%, the most since July.  Data from the Labor Department showed initial jobless claims dropped to 512,000 last week, the lowest level since January, and worker productivity climbed at a 9.5% annual rate in the third quarter, the fastest pace in six years.
• Today’s NFP report may show US employers cut the fewest jobs in October in more than a year as economic recovery eased the worst labor-market slump since the 1930s.  According to market median forecasts, payrolls fell by 175,000 workers, the smallest drop since August 2008 and the unemployment rate climbed to a 26-year high of 9.9%.  The latest projections would bring total jobs lost since the recession began in December 2007 to 7.4 million, the biggest decline of any economic slump since the Great Depression.
• The greenback could be heading for a weekly loss against the majors if the NFP reports fewer job cuts in the US, boosting demand for higher-yielding assets.  The EURUSD briefly traded above 1.4915 yesterday before settling at 1.4864.
• Both the Bank of England and the ECB left their policy rate unchanged at 0.5% and 1.0% respectively.  The Bank of England slowed the pace of bond purchases, by only increasing their quantitative easing program by 25BLN sterling against higher expectations.  Trichet indicated unlimited 12-month loans to commercial banks won’t be extended after next month’s operation.

Currency to watch out for: EURUSD & GBPUSD

• The EURUSD pivot point is at 1.4825 with a preference to enter into long positions at 1.4835
• The GBPUSD pivot point is at 1.6525 with a preference to enter into long positions at 1.6535

Today’s calendar and market movers:

• Germany Factory Orders month on month expected to drop to 1.0%
• US Non-Farm Payrolls expected to drop -175,000 in October, a significantly lower figure when compared with -263,000 in September, -304,000 in July and -463,000 in June.  The reduction in payrolls probably lifted the unemployment rate to 9.9%, up 0.1% from September.
• The Group of 20 is due to meet about a range of global economic issues including bank bonuses and macro-economic exit policies, in St. Andrews.

Stocks:

• US Equities rallied on Thursday, with gains broad based, after better than expected weekly jobs and non-farm productivity data.  At the closing bell the Dow closed up 2.08%, the S&P closed up 1.92% and the NASDAQ closed up 2.4%.  The NSADAQ slightly outperformed its peers after Cisco reported earnings that topped analysts’ estimates and confirmed it would buy back 10BLN USD.
• As of 07:00 GMT the Nikkei is trading at 0.74% and the Hang Seng at 1.57%.

Daily Forex Outlook - US Unemployment Data Looming

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CURRENCY TRADING SUMMARY - 6th November (00:30GMT)

U.S. Dollar Trading (USD) with stocks rallying for a 4^th day the market went back into ‘risk on’ mode and the USD was on the back foot. Weekly Jobless claims were 512k vs. 530k previously. Q3 Productivity at 9.5% was very strong vs. 6.5% forecast. In US Stocks, DJIA +203 points closing at 10005, S&P +20 points closing at 1066 and NASDAQ +49 points closing at 2105. Looking ahead, October Non Farm Payrolls forecast at -175k vs. -263k previously. The October Unemployment rate is forecast at 9.9% vs. 9.8% previously.

The Euro (EUR) continued to find strength on dips as US stocks soared and the ECB was relatively upbeat at their ECB meeting were they held rates at 1.0%. The pair failed to track the gains completely on Wall st. as the market pauses ahead of the US Unemployment data tonight. Overall the EUR/USD traded with a low of 1.4810 and a high of 1.4920 before closing at 1.4880. looking ahead, September Industrial Orders are forecast at 1% vs. 1.45 previously.

The Japanese Yen (JPY) was strong is Asia as the Nikkei fell but then was sold for most of the day as the US had its biggest rally in 2 months. AUD/JPY and GBP/JPY led the rebound but the market was well contained again as the event risk of the NFP today contained risk appetite. Overall the USDJPY traded with a low of 89.97 and a high of 90.84 before closing the day around 90.75 in the New York session. Looking ahead, September Leading Indicators previously at 0.8%.

The Sterling (GBP) shot higher as the BoE increased the Asset purchase program by 25bn vs. 50bn forecast. The BoE held rates at 0.5%. The market found resistance above 1.6600 and settled below the figure. EUR/GBP support was in the low 0.89’s. GBP/JPY reclaimed the 150 Yen level. Overall the GBP/USD traded with a low of 1.6639 and a high of 1.6464 before closing the day at 1.6580 in the New York session. Looking ahead, UK PPI Output prices are forecast at 0.3% vs. 0.5% m/m previously.

The Australian Dollar (AUD) good data could not help the Aussie rally in Asia as AUD/JPY selling dragged the pair to day lows before a change in sentiment pushed the pair higher once again in the US. September Trade Balance at -1.85bn vs. -2.1bn forecast. Overall the AUD/USD traded with a low of 0.9023 and a high of 0.9127 before closing the US session at 0.9105. Looking ahead, RBA Monetary Policy Statement.

Oil & Gold (XAU) consolidated gains settling just under 00 level. Overall trading with a low of USD83 and high of USD95 before ending the New York session at USD91 an ounce. Fell back below a barrel on profit taking after recent 3 day rally. Crude Oil was down {content}.78 ending the New York session at .62.

TECHNICAL COMMENTARY

Euro - 1.4875

Initial support at 1.4702 (Nov 4 low) followed by 1.4626 (Nov 3 low). Initial resistance is now located at 1.4917 (Nov 5 high) followed by 1.4927 (Oct 27 high)

Yen - 90.85

Initial support is located at 89.99 (Nov 5 low) followed by 89.20 (Nov 2 low). Initial resistance is now at 91.32 (Nov 4 high) followed by 91.62 (Oct 29 high).

Pound - 1.6575

Initial support at 1.6402 (Nov 4 low) followed by 1.6241 (Oct 19 low). Initial resistance is now at 1.6693 (Oct 23 high) followed by 1.6742 (Sept 11 high).

Australian Dollar - 0.9110

Initial support at 0.8971 (Nov 4 low) followed by the 0.8907 (Nov 2 low). Initial resistance is now at 0.9144 (Nov 4 high) followed by 0.9218 (Oct 27 high).

Gold - 1091

Initial support at 1080 (Nov 4 low) followed by 1055 (Nov 3 high). Initial resistance is now at 1097 (Nov 4 high ) followed by 1100 (Psychological level).

Oil - 79.80

Initial support at 78.5 (Intraday Support) followed by 78.0 (Intraday support). Initial resistance is now at 81 (Nov 5 high) followed by 82 (October High).

Daily Forex Report - USD mixed, jobless claims fall more than expected

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• USD: Lower, jobless claims fall, productivity soars, unit labor costs decline, stocks surge
• JPY: Lower, supported by a dip in risk appetite as equities decline in Asia
• EUR: Higher, ECB leaves interest rates unchanged, Trichet sees pick up in economic activity
• GBP: Higher, BOE expands its asset purchase plan by £25 bln, industrial and manufacturing output rise
• CAD and AUD: AUD higher & CAD lower, hawkish comments from RBA Governor Stevens, deficit widens

Overview     
USD traded mixed to lower Thursday as investors digest the impact of Wednesday’s decision by the Fed to maintain low interest rates for an extended period and today’s decision by the BOE to maintain current level of interest rates and expand its asset purchase plan. The BOE will expand its asset purchases by £25bln. GBP firmed in reaction to the BOE’s decision to expand liquidity as the size of the increase was smaller than market expectations. The ECB held rate policy steady as expected. In the press conference following the ECB policy decision ECB president Trichet made positive comments about EU economic outlook and signaled the first steps towards an exit strategy from non-conventional policy measures. His comments boosted demand for the EUR. AUD was supported by hawkish comments from RBA governor Stevens that neutral policy is higher than current yields JPY traded higher supported by risk aversion as equities decline in Asia. US economic data was positive with jobless claims dropping to the lowest level since January, Q3 productivity rose the most in six years and unit labor costs declined by more than expected. The drop in the jobless claims may encourage analysts to revise their nfp estimates lower. The surge in productivity and lower labor costs cuts two ways. Employers are doing more with less and the cost of labor is going down. This could encourage employers to maintain current levels of employment or begin to increase hiring. It will depend on how confident employers are in the sustainability of the US recovery. Many employers may choose to increase hours worked instead of hiring new employees. In addition, US retailers posted better than expected October sales. US equities rallied sharply in reaction to today’s data but the reaction in the Forex market was muted. There was little reaction to a statement from and NYU economist Roubini that he expects the USD to rise 20% over the next six months and that the end rally in risk assets may end abruptly.   

US October unemployment will be released Friday. US unemployment is expected to rise to a new 26 year high but nonfarm payroll job losses will likely be less than 200k. The US unemployment report will be key to investor risk sentiment and speculation about whether the US recovery is sustainable. FX price direction remains closely correlated to equities and risk sentiment.

Today’s US data:
Jobless claims for week ending 10/31 declined by 20k to 512k, a reading of 521K was expected. Jobless claims were at the lowest level since January. Q3 productivity rose 9.5%, a 5.5% rise was expected. Q3 unit labor costs dropped by 5.2%, a 4.5% decline was expected.

Upcoming US data:
On November 6th October nonfarm payroll and unemployment will be released. The nonfarm payroll is expected at -175k compared to -263k last week and the unemployment rate is expected to rise 0.1% to 9.9%. September wholesale inventories and consumer credit will also be released on November 6th. Wholesale inventories are expected to fall 1% and consumer credit is expected at -10bln.

JPY
JPY traded higher supported by a spike in risk aversion as equities markets decline in Asia. The Nikkei index closed 127 points lower. There was limited reaction to the release of the BOJ minutes for the 13/14th policy meeting. The minutes state that funding conditions remain severe at smaller firms and that most BOJ members agreed to maintain accommodative policy. The Nikkei carried a report which states that the BOJ blames government policies for job losses and lower wages. A rift appears to be brewing between the Japanese government and the BOJ over the outlook for Japan’s economy and the BOJ’s decision to begin an exit from its corporate bond support plan. BOJ officials have been generally more up beat about the outlook for Japan’s economy and the Japanese government has increased pressure on the BOJ to maintain actions to support economy. JPY upside is limited by report of a bigger than expected decline in US jobless claims and stronger US equity market trade. The jobless claims report boosted demand for equities and encouraged a rewind of risk.

On November 6th September leading indicators will be released expected at 1% compared to 0.8% last month.

Key technical levels to watch in USD/JPY include support at 89.18 the November 2nd low with resistance at 91.80 the October 28th high.

EUR
EUR traded higher supported by a recovery in risk appetite sparked by release of better than expected US jobless claims and a huge jump in US Q3 productivity. EUR reaction to the ECB’s decision to hold rate policy was mixed as the decision was widely expected. The ECB elected to hold rate policy changed at 1%. Positive comments from ECB President Trichet about the outlook for the EU recovery sparked mild demand for the EUR. Trichet said that the inventory cycle and exports have boosted the economy. Trichet also said that he sees a pickup in economic activity in the second half of the year and expects the EU to experience a gradual recovery. Trichet’s comments are seen as hawkish and set the stage for the eventual exit from unconventional policy measures. EUR gains were short lived as investor’s square positions ahead of Friday’s release of US nonfarm payroll for October. EU economic data was mixed with September retail sales reported down 0.7%.

The technical outlook for the EUR is positive as the EUR trades above 1.4900. Expect EUR support at 1.4702 the November 5th low with resistance at 1.5065 the October 23rd high.

GBP
GBP traded mixed to higher supported the BOE’s decision to expand its asset purchase plan by less than expected and in reaction to report of improving UK industrial and manufacturing output. The BOE elected to hold rates unchanged at 0.5% and expand its asset purchase plan by £25bln to £200bln. Some analysts have concluded that this may be the last extension of the quantitative ease program by the BOE unless the economy starts to turn down. The smaller than expected increase in the BOE’s asset purchase plan is seen as a sign of confidence in the UK economy. Not all forecasters are satisfied with today’s BOE decision, Kaletsky calls for the BOE to cut rates to 0.25% and a former MPC member says that the BOE should cut his remuneration rate to zero to encourage bank lending. UK September industrial production rose by 1.6% and manufacturing output rose by 1.7%. The rise in September manufacturing output was the fastest in seven years. Recent UK economic data shows improvement in the housing and consumer sector and today’s manufacturing data also points towards recovery. Whether the BOE will continue expanding its asset purchase program will depend on upcoming UK economic data. NIESR says the UK economy contracted by 0.4% in the three months through October.  The impact of the BOE decision should be limited as focus returns to risk appetite. GBP upside was limited by the NIESR GDP report and position squaring ahead of tomorrow’s release of US nonfarm payrolls.

On November 6th October PPI will be released expected unchanged at 0.5%.

The technical outlook for GBP has improved on today’s rally above 1.6500. Expect near-term support at 1.6400 the November 3rd low with resistance at 1.6694 the October 23rd high.

CAD
CAD traded mixed initially supported by strong US jobless claims and productivity data. CAD gains were limited by report that Canadian building permits came as expected. Canada’s September building permits rose 1.6%. Canada’s October Ivey PMI rose to 61.2, a reading of 59 was expected. CAD turned higher today after the release of the better than expected Ivey manufacturing report is. CAD price action was disappointing in light of the sharp rally in US equity markets. Investors were reluctant to put on new positions ahead of Friday’s employment reports in the US and Canada. Focus turns to Friday’s release of US and Canadian employment reports. Last week Canada reported that August GDP declined by 0.1%, 0.1% rise was expected. This marked the first monthly GDP drop since May and signals weaker outlook for Canada’s recovery. The GDP decline reflects weaker demand for energy and manufacturing and the impact of strong CAD on Canada’s export demand. The GDP report may encourage speculation that the BOC will have to maintain accommodative policy for a longer period and that’s BOC officials may step up for more intervention. The unemployment report will be another key indicator of Canada’s growth outlook. Canada is expected to have created 10k jobs last month. CAD price direction will continue to track crude and equity markets.

On November 6th October unemployment will be released expected unchanged at 8.3% with employment growth at 6K compared to 31k last month.

The technical outlook for CAD is mixed as USD/CAD falls below 1.0600. Look for near-term support at 1.0502 the October 26th low with resistance at 1.0872 the November 2nd high.

AUD
AUD traded higher supported by hawkish comments from RBA Governor Stevens and stronger US equity market trade. RBA Governor Stevens said that neutral policy is higher than the current level of Australian interest rates. His comments revive speculation that the RBA may hike rates again in December. US equities surged in reaction to report a sharp drop in US jobless claims and soaring US productivity. The jobless claims report suggests that Friday’s US employment report will show a continuing moderation in US job losses. The productivity gain suggests that the US Q4 growth may be stronger than expected. Improved US labor market and growth outlook contributes to risk appetite and demand for high yield currencies like AUD. Tuesday the RBA elected to hike rates 25 basis points and gave no indication whether interest rates will be hiking in December. Stevens’s comments may encourage speculation that the RBA will hike rates 25bps in December. AUD gains were limited by report that Australia’s trade deficit widened last month and vehicle sales rose. Australia’s September trade deficit rose to 1.849bln from 1.612bln in August with exports and imports up 5%. October vehicle sales rose 3.4%. AUD price direction will continue to closely track risk appetite equities in the direction of commodity prices.

The technical outlook for the AUD is positive as the AUD rallies above 9100. Expect AUD support at 8961 the November 4th low with resistance at 9175 the October 30th high.

US Morning Notes - USD mixed, BOE increases asset purchases by £25bln

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FX Highlights

• The USD is trading lower pressured by the Fed’s decision Wednesday to maintain low yields for an extended period, GBP supported by a report that the BOE increased its asset purchases by less than expected and UK industrial and manufacturing output came in higher than expected, ECB elects to hold rate policy unchanged, AUD supported by hawkish comments from RBA Governor Stevens that neutral policy is higher than the current level of interest rates, JPY supported by risk aversion as stocks fall in Asia
• Focus turns to today’s release of US jobless claims, productivity and unit labor costs and Canada’s building permits and Ivey PMI
• BOJ minutes for the October 13-14th policy meeting state that most board members agreed to keep monetary policy accommodative, JPY higher
• Australia’s September trade deficit rises to 1.849bln compared to 1.612bln deficit in August, exports and imports rose 5%, October vehicle sales rose 3.4%, RBA Governor Stevens says neutral policy is higher than for current level of interest rates
• UK September industrial production rose 1.6%, manufacturing output rose 1.7%, BOE elects to hold rate policy unchanged and will add £25bln to its asset purchase program, GBP mixed
• EU September retail sales fall 0.7%, ECB elects to leave monetary policy unchanged, focus turns to the press conference following the ECB policy decision, EUR mixed
• Swiss Q4 consumer sentiment Index improves to -30 from -42 last month, October CPI rises 0.6%
• NYU economist Roubini warns that the rally in risk assets may end abruptly, he went on to say that the USD may rally 20% over the next six months, Pimco’s El -Erian says that the Fed is fueling the USD carry trade
• Consumer bankruptcies were up 27.9% in October says the American Bankruptcy Institute
• US equity markets set to open mixed, European equities 0.5% lower, Nikkei closed 127 points lower

Upcoming Events

• US - Thursday, jobless claims for week ending 10/31 will be released expected at 521k compared to 530k last week along with Q3 productivity expected at 5.5% and unit labor costs at -4.5%
• CAN - Thursday, September building permits will be released expected at 1.6% compared to 7.2% last month along with October Ivey PMI expected at 59 compared to 61.7 last month

EU Morning Update – Fed officials kept rate at close to zero percent

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Fed officials kept their benchmark overnight lending rate at between zero and 0.25%, where it has been since December.

• The hard task of determining when the recovery is strong enough to withdraw the trillion the Fed injected to avert a depression falls on Fed Chairman Bernanke.  Last week’s US GDP expansion resulted in a weaker greenback as the Fed signaled growth alone won’t be enough to warrant tighter policy.  The Federal Reserve repeated it will keep interest rates close to zero for an “extended period” and specified for the first time that policy will stay unchanged as long as inflation expectations are stable and unemployment fails to decline.
• The Labor Department tomorrow will probably report that the unemployment rate rose to 9.9% in October, from 9.8% in the previous month, as companies cut another 175,000 jobs, according to median forecasts of economists.  More Americans filed bankruptcy in October than any month since changes to bankruptcy laws in 2005.
• Oil price rose to as high as .06 a barrel after a report showed that crude inventory surprisingly drew more than 4 million last week versus an expected rise of 1.7 million barrels.  Further decline in USD as the Fed kept its dovish stance also provided a favorable environment for oil prices’ rally.  However, investors remained uncomfortable as price surged above 80 and profit-taking was seen from then on.  Gold advanced further up amid weakness in USD and speculations on more central bank purchases.  The benchmark contract jumped to as high as 1098.50 before settling at 1087.3.

Currency to watch out for: EURUSD & GBPUSD

• The EURUSD pivot point is at 1.4800 with a preference to enter into long positions at 1.4810
• The GBPUSD pivot point is at 1.6480 with a preference to enter into long positions at 1.6490

Today’s calendar and market movers:

• UK Official Bank Rate expected to remain unchanged at 0.5%
• EU ECB Minimum Bid Rate expected to remain unchanged at 1.0%
• US Unemployment Claims expected to drop to 523,000

Now onto Stocks:

• US equities finished slightly higher on Wednesday after ADP employment data showed the pace of job losses continued to slow and the Fed signaled an improvement in economic conditions.  Right after the Fed’s rate decision, price action in equities was volatile.  The major US averages initially moved to the downside, before spiking up to new highs soon afterwards.  However, equities then proceeded to sell off in the final half hour of trade as traders took profits.  At the closing bell the Dow Jones closed up 0.31%, the S&P closed up 0.1% and the NASDAQ closed up 0.09%.
• As of 07:00 GMT the Nikkei is trading at -1.29% and the Hang Seng at -0.82%.

Daily Forex Outlook - FED remains Dovish, USD Weak

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CURRENCY TRADING SUMMARY - 5th November (00:30GMT)

U.S. Dollar Trading (USD) was on the back foot as stocks rallied around the world and the Federal Reserve left rates at 0.25% and stating that rates would remain low for an extended period of time. ADP October Employment Report was -203k vs. -188k previously. Also released, ISM Services forecast at 50.6 vs. 51.6 forecast. In US Stocks, DJIA +30 points closing at 9802, S&P +1 points closing at 1046 and NASDAQ -2 points closing at 2055. Looking ahead, Weekly Jobless Claims are forecast at 523k vs. 530k previously.

The Euro (EUR) rallied for most of the day on continued strength in commodities and a rebound in stocks. September PPI was as forecast at -0.4%. EUR/JPY enjoyed solid gains although a late sell off in stocks induced profit taking. Overall the EUR/USD traded with a low of 1.4701 and a high of 1.4911 before closing at 1.4880. Looking ahead, ECB rate announcement forecast to remain at 1.0%.

The Japanese Yen (JPY) was very weak as the crosses began to rally and technical’s turned against the Yen. USD/JPY struggled to hold above 91 Yen on a mixed response to the FOMC but remains supported on dips. EUR/JPY returned to the 135 figure. Overall the USDJPY traded with a low of 90.03 and a high of 91.34 before closing the day around 90.80 in the New York session.

The Sterling (GBP) rallied above 1.6500 on improved risk appetite and strong GBP/JPY buying. October PMI Services was 56.9 vs. 55.4 previously. 1.6600 capped the topside but the market is well supported ahead of today’s BoE meeting. Overall the GBP/USD traded with a low of 1.6600 and a high of 1.6399 before closing the day at 1.6550 in the New York session. Looking ahead, BoE Rate meeting. Also released, September Industrial Production forecast at 1% vs. -2.5% previously.

The Australian Dollar (AUD) was dented in Asia from poor September Retail Sales of -0.2% vs. +0.4% forecast. The dip below 0.9000 proved short lived and when the market continued to push higher the Aussie rebounded. AUD/JPY enjoyed the Yen weakness combined with the ongoing rally in gold. Overall the AUD/USD traded with a low of 0.8970 and a high of 0.9146 before closing the US session at 0.9105. Looking ahead, September Trade Balance forecast at -2100mln vs. -1524mln previously.

Oil & Gold (XAU) continued to push higher on yesterdays momentum nearing the 00 level. Overall trading with a low of USD79 and high of USD98 before ending the New York session at USD92 an ounce. Broke above a barrel as the rally accelerated. Crude Oil was up {content}.80 ending the New York session at .40.

TECHNICAL COMMENTARY

Euro - 1.4875

Initial support at 1.4626 (Nov 3 low) followed by 1.4581 (Oct 5 low). Initial resistance is now located at 1.4909 (Nov 4 high) followed by 1.4927 (Oct 27 high)

Yen - 90.80

Initial support is located at 89.87 (Nov 3 low) followed by 89.20 (Oct 14 low). Initial resistance is now at 91.62 (Oct 29 high) followed by 92.32 (Oct 27 high).

Pound - 1.6560

Initial support at 1.6241 (Oct 19 low) followed by 1.6141(Sept 30 low). Initial resistance is now at 1.6604 (Oct 29 high) followed by 1.6693 (Oct 23 high).

Australian Dollar - 0.9100

Initial support at 0.8907 (Nov 2 low) followed by the 0.8866 (Oct 7 low). Initial resistance is now at 0.9144 (Nov 4 high) followed by 0.9218 (Oct 27 high).

Gold - 1091

Initial support at 1055 (Nov 3 low) followed by 1035 (Oct 30 high). Initial resistance is now at 1100 (Key level ) followed by 1114 (1.382 of 930.34 to 1024.28 from 985).

Oil - 80.40

Initial support at 78.5 (Intraday Support) followed by 78.0 (Intraday support). Initial resistance is now at 81 (Nov 5 high) followed by 82 (October High).

Special FX Report - US nfp job losses likely moderated in October

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US October unemployment and nonfarm payrolls (nfp) will be released on Friday, November 6th at 8:30 ET. Stability in recent US jobless claims data, a sharp rise in Q3 GDP, improvement in the employment index of the October manufacturing ISM and a continued decline in the ADP unemployment index points to a slowdown in nfp job losses during October. The October ISM employment index rose to its highest level since April 2006 at 53.1 from 46.2 in September. The ISM report suggests that hiring is starting to pick up. The ADP report also shows that job losses slowed. ADP said that employers cut 203k jobs in October compared to 227k in the prior month. In addition, the October Challenger survey said job cuts were 51% slower than a year ago at 55, 679 compared to 112, 884 in October 2008. The ISM report may overstate the improvement of the labor market because most of the hiring was either based on calling back of  laid of workers or adding temporary workers. Officials from the ADP said that they expect unemployment to keep rising even as the economy begins to expand. The ADP report suggests US nfp will likely come in near -190k. A Marketwatch survey says that economists expect an nfp drop of 150k.

US employers shed 263k in September compared to 201k in the prior month. A 180k nfp loss was expected. According to the September report, the number long-term unemployed rose to 5.4 mln and the US has lost 7.2 mln jobs since the recession began in December 2007. The September unemployment rate rose 0.1% to a 26 year high at 9.8%. The largest job losses were in construction, manufacturing, retail trade and government. According to the Bureau of Labor Statistics nearly 500k dropped out of the workforce most likely due to frustration and if the dropouts were included the unemployment rate would be over 10%. If laid off workers who have settled for part-time work or have given up looking for new employment are included the unemployment rate rose to 17% in September.

The October unemployment rate is expected to rise 0.1% to 9.9% with nfp expected at -175k. This would be the best reading for nfp since August 2008. The historical pattern has been that hiring tends to lag after the start of the recovery. In recent years the lag time for jobs recovery post recession has been getting worse with jobs growth resuming five months after the end of the 1982 recession, jobs growth rising a year after the 1991 recession and taking two and half years following the 2001 recession. It appears that employers are becoming much more cautious about hiring after recessions technically end. This is one of the downsides of the flexibility of the US labor market which allows employers to quickly adjust employment levels to the shifts in economic growth. The Obama administration says that US employment is expected to rise in the months ahead and job creation will lag the recovery. The October employment report is expected to confirm that despite the fact the US economy is emerging from recession the economy is unlikely to experience significant improvement in employment in the near future. Tuesday J & J announced plans to lay off 8,200k and today Microsoft announced plans to layoff an additional 800 employees. The impact of the October unemployment report will depend on how US equity markets trade. Because the USD has emerged as the global funding currency US price direction has become even more closely correlated to risk appetite and the direction of equities. The USD experienced a sharp selloff after the release of stronger than expected US GDP as equity markets rallied in reaction to the report. The opposite reaction may emerge if US job looses fail to meet or beat expectations.

Daily Forex Reports - USD lower as stocks rise to the days highs after ISM

Posted by admin as Forex News

• USD: Lower, ADP employment comes in near expectation, non- manufacturing ISM drops
• JPY: Lower, pressured by improving risk appetite
• EUR: Higher, EU PPI declines for the ninth straight month , services PMI rises
• GBP: Mixed, services PMI rises to a two-year high
• CAD and AUD: AUD & CAD higher, crude prices rise above a barrel, gold hits fresh record high

Overview     
USD and JPY traded lower ahead of today’s FOMC policy decision pressured by a rebound in risk appetite as global equity markets rally. Global equity markets were supported by report of improving US October auto sales, an upgrade of China’s growth outlook from the World Bank and firmer bank stocks. GBP was supported by report the UK services PMI rose to its best level in two years. EUR traded higher with gains limited by report that EU PPI declined for its ninth straight month and in reaction to report that Fitch cut Ireland’s rating. Fitch said the rationale for the Ireland rating cut was weak GDP and rising government liabilities. Commodity currencies traded higher tracking the rise to a record level in the price of gold and crude prices rising above a barrel. AUD gains were limited by report of weaker than expected Australian retail sales. The retail sales decline may make a December RBA rate hike less likely. October ADP employment declined for the seventh straight month and Challenger October job cuts were 51% lower than a year ago. These reports suggest that the pace of US nonfarm job losses likely slowed in October. Non-manufacturing ISM came in slightly lower than expectation.

The ECB and BOE meet on Thursday. The ECB is expected to leave monetary policy unchanged. There is great uncertainty over whether the BOE will elect to expand its asset purchase program as UK GDP posted a negative result. US October unemployment will be released Friday. US unemployment is expected to rise to a new 26 year high but nonfarm payroll job losses will likely be less than 200k. The US unemployment report will be key to investor risk sentiment and speculation about whether the US recovery is sustainable. FX price direction remains closely correlated to equities and risk sentiment.

Today’s US data:
October ADP employment declined by 203k, a reading of -190k was expected. October non manufacturing ISM came in at 50.6 compared to 50.9 last month, a reading of 51.8 was expected. FOMC statement will be released at 19:15GMT.      

Upcoming US data:
On November 5th initial jobless claims for week ending 10/31 will released expected at 521k compared to 530k last week. Q3 productivity and unit labor costs will also be released on November 5th. Q3 productivity is expected at 5.5% compared to 6.6% last month and unit labor costs are expected at -4.5% compared to -5.9% last month. On November 6th October nonfarm payroll and unemployment will be released. The nonfarm payroll is expected at -175k compared to -263k last week and the unemployment rate is expected to rise 0.1% to 9.9%.

JPY
JPY traded lower pressured by improving risk appetite as global equity markets rally and in reaction to a statement from BOJ’s Shirakawa that interest rates will remain low. Shirakawa went onto say that deflationary pressures will likely continue and the BOJ will maintain very easy monetary policy as the BOJ ends its corporate bond support plan. JPY was also pressured by a statement from Japan’s Finance Minister Fujii that the Japanese government will have to issue more bonds to cover this year’s tax shortfall which resulted from the weaker economy. JPY weakened in cross trade. AUD/JPY and GBP/JPY traded over 1% higher with gains fueled by improving risk appetite and GBP supported by report that UK services PMI rose to a two-year high. There was little reaction to a report in Japan’s press that Japan’s Cabinet Office will confirm that the Japanese economic recovery is underway in a report to be released on Friday. Japan’s October monetary base rose by 4.4% y/y.

On November 6th September leading indicators will be released expected at 1% compared to 0.8% last month.

Key technical levels to watch in USD/JPY include support at 89.18 the November 2nd low with resistance at 91.80 the October 28th high.

EUR
EUR traded higher supported by improving risk appetite as global equity markets rally and in reaction to report that EU services PMI continued to improve in October. As noted above, global stock markets rallied Wednesday partly in reaction to an upgrade of China’s growth forecast by the World Bank and in reaction to Tuesday’s report of improving US housing, manufacturing and auto sales data. EU October services PMI composite index rose to 53 from 51.1 in September. EUR gains were limited by report that EU PPI declined for its ninth straight month and in reaction to report that Fitch downgraded Ireland’s rating. EU September PPI declined by 0.4%. Continued deflationary pressures in the EU make it unlikely that the ECB will be in any hurry to tighten monetary policy. Focus turns to Thursday’s ECB meeting. The ECB is expected to hold interest rate policy unchanged at 1% and maintain a neutral policy bias through the end of the year. The ECB is also expected to note the improving outlook for the economy and may begin to lay out the details of its exit strategy from unconventional policy measures. ECB’s Weber says that liquidity measures will be allowed to expire on their own. The trade will be monitoring the press conference following the ECB policy meeting for clues as to the timing of when the ECB plans to begin its exit strategy or any change in policy bias. The EUR is holding key trend line support above 1.4600. A break of this level could signal a deeper downside technical correction for the EUR.

On November 5th EU September retail sales will be released expected at 0.3% compared to -0.2% last month. ECB meet on November 5th. No policy change expected.

The technical outlook for the EUR is mixed as the EUR holds above key trend line support above 1.4600. Expect EUR support at 1.4626 the November 3rd low with resistance at 1.4860 the October 30th high.

GBP
GBP traded higher supported by improving risk sentiment and report that UK consumer confidence rose to its highest level since April 2008 and October services PMI rose to a two-year high. UK October consumer confidence rose to 72, BRC October shop price index was unchanged and October services PMI rose to 56.9 from 55.3 last month. These reports suggest that the UK economy is recovering and this may reduce pressure on the BOE to aggressively expand its asset purchase program. Focus turns to Thursday’s BOE policy meeting. It remains unclear whether the BOE will elect to expand quantitative ease. In light of last week’s report of a surprise decline in UK Q3 GDP the BOE may elect to expand its asset purchase plan at Thursday’s policy meeting. The BOE meet on November 5th and are expected to decide whether to extend the current size of the asset purchase plan of £175bln. Based on the UK GDP report it may be difficult for the BOE to refrain from adding additional stimulus. Recent GBP price action has found that the GBP benefits on BOE decision to hold the current level of asset purchases and weakens if the BOE elects to expand quantitative ease. According to a Bloomberg survey the median of 48 analysts predict that the BOE will expand asset purchases by £50bln to £225bln.  The impact of the BOE decision may be limited as focus returns to risk appetite.

On November 5th September industrial production will be released expected at -1% compared to -2.5% last month. The BOE meet on November 5th and it is uncertain whether the BOE will elect to expand its asset purchase program and if so by how much. On November 6th October PPI will be released expected unchanged at 0.5%.

The technical outlook for GBP has improved on today’s rally above 1.6400. Expect near-term support at 1.6251 the October 26th low with resistance at 1.6580 the October 30th high.

CAD
CAD traded higher supported by rally to fresh record high in the price of gold, higher crude prices which traded above a barrel in reaction to improving risk appetite as global equity markets rally. The rally in equities encourages demand for risk. The World Bank’s upgrade of China’s growth outlook coupled with improving US manufacturing and housing data and stronger October auto sales contributes to optimism about the global recovery and fuels demand for commodity currencies. There were no major economic releases from Canada today. This week the focus will be Friday’s release of US and Canadian unemployment. The US report is expected to show that the pace of US job losses continues to slow. Canada is expected to have added 10,000 more jobs last month according to a Bloomberg survey of 22 economists. Last week Canada reported that August GDP declined by 0.1%, 0.1% is rise was expected. This marked the first monthly GDP drop since May and signals weaker outlook for Canada’s recovery. The GDP decline reflects weaker demand for energy and manufacturing and the impact of strong CAD on Canada’s export demand. The GDP report may encourage speculation that the BOC will have to maintain accommodative policy for a longer period and that’s BOC officials may step up for more intervention. CAD price direction will continue to track crude and equity markets.

This week’s Canadian economic calendar includes the November 5th release September building permits expected at 2% compared to 7.2% last month along with IVEY PMI index for October expected at 62 compared to 61.7 last month. On November 6th October unemployment will be released expected unchanged at 8.3% with employment growth at 6K compared to 31k last month.

The technical outlook for CAD is mixed as USD/CAD falls below 1.0600. Look for near-term support at 1.0502 the October 26th low with resistance at 1.0872 the November 2nd high.

AUD
AUD traded higher as global equity markets rise investors take on risk. Australia’s economic data was mixed. September retail sales posted an unexpected 0.2% decline, building approvals rose 2.7% and the PSI rose by 5.5 points to 54.8. The PSI rise added additional support to today’s AUD rally. Some analysts suggest that the weaker retail sales will lessen the chance of another RBA rate hike in December. AUD was also supported by rising commodity prices as gold trades in a new record high crude prices top a barrel. Although the rise in the price of gold is attributed to yesterday’s announcement that the IMF will sell 200 tons of gold to the reserve Bank of India there are additional reports that gold may be benefiting from competition with the USD for safe haven flows concerns and rising US deficits may put the USD reserve currency status at risk. Tuesday the RBA elected to hike rates 25 bps and gave no indication whether interest rates will be hiking in December. Uncertainty about RBA policy outlook may limit demand for the AUD but AUD price direction will continue to closely track risk appetite equities in the direction of commodity prices.

The technical outlook for the AUD is mixed as hold AUD rallies above 9100. Expect AUD support at 8961 the November 4th low with resistance at 9175 the October 30th high.

US Morning Notes - USD & JPY lower tracking a rebound in risk appetite

Posted by admin as Forex News

FX Highlights

• The USD and JPY start Wednesday’s session lower pressured by improving risk appetite as global equity markets rally and the price of gold and crude trade higher, the World Bank upgrades China’s growth forecast, GBP supported by report of rising consumer confidence and services PMI, UK services PMI at its best level in two years, EU PPI weakens for the ninth straight month, Fitch cuts Ireland’s rating limiting EUR gains, commodity currencies mixed as gold trades at new record high and Australia’s retail sales decline
• Focus turns to today’s release of US ADP employment, non-manufacturing ISM and FOMC policy decision
• Japan’s Finance Minister Fujii shows Japan will issue more bonds this year to cover the tax shortfall, Japan’s October monetary base expands 4.4%, BOJ Governor Shirakawa says that interest rates will remain low, JPY lower
• Australia’s September retail sales fall 0.2%, building approvals rose 2.7%, PSI rises 5.5 points to 54.8, AUD higher
• UK October nationwide consumer confidence rises to its highest level since April 2008 at 72, BRC October shop price index unchanged, October services PMI rises to 56.9 from 55.3, GBP higher
• ECB’s Weber says liquidity measures will expire on their own, EU September PPI falls 0.4%, October services PMI rises to 53 from 51.1, EUR higher
• Challenger October job cuts were 51% lower than last year
• White House officials warn against withdrawal of stimulus too quickly
• Chrysler October autos sales -32.3%, Ford October auto sales rose 2.6%, Toyota sales fell 3.5%, Nissian sales rose 5.6%, GM sales rose 4%, Kia sales rose 45.3%, Auto sales for October 10.46mln
• J & J plans to cut 8,200k jobs and will save more than a bln
• US equity markets set to open higher, European equities 1.5% higher, Nikkei closed 41 points higher

Upcoming Events

• US - Wednesday, October ADP employment will be released expected at -190k compared to -263k last month along with October non manufacturing expected at 51.5 compared to 50.9 last month and the FOMC policy decision
• CAN - Wednesday , no major Canadian economic data is due for release today