USD: Downside Risk Ahead Of Jobs Report
Swissquote Bank Ltd | Nov 06, 2015 07:47AM ET
RBA keeps all doors open (by Arnaud Masset)
Overnight, the Reserve Bank of Australia released its statement on monetary policy. Just like the BoE did, the RBA lowered its short-term inflation forecast. The bank stated that “wage growth has been broadly in line with expectations” and are not expected to accelerate over the next couple of years. Headline CPI is expected to reach 1.75% by year-end compared to a forecast of 2.5% in August. Likewise, the RBA’s inflation forecast for the year through June 2016 has been trimmed to between 1.5%-2.5% from between 2%-3% in the August statement.
Despite the fact that the RBA cut its growth forecast by a quarter point for 2015 to 2.25%, the bank remains upbeat about the outlook, and especially about the job market. All in all, the RBA seems to be pretty happy with the overall situation but is nevertheless still ready to take further measure to support the economy. Long story short, the Reserve Bank wants to keep all options open, just in case the Chinese situation deteriorates further. AUD/USD still sits on the 0.7139 key level (Fib. 50% on September-October rally).
All eyes on NFPs (by Peter Rosenstreich)
Recent Fed comments have made today’s payroll report the headline event once again. Fed Chair Janet Yellen in her testimony to House Financial Services Committee stated that December is a “live possibility” as long as the US economy remains firm. This suggests that, in Yellen’s view, today’s payroll number will provide critical details. The headline nonfarm payroll is expected to rebound to 185k from last month’s 142k. The unemployment rate is expected to fall 0.1% to 5.0%, while average hourly earnings should rise 0.2% according to consensus. In addition, the low print for the last two reads should see an upwards revision, considering the past trend of revisions. This week’s ADP payrolls printed at 182k indicating that NFP should come in around 185k. US jobless claims increase to 276k above 262k expectations in the week ending October 31 from 260k. This read indicates that the US is close to full employment, which could stimulate the Fed to hike. Further evidence of a strengthening labor market would cement a rate hike in December. From our vantage point any NFP read over 190k today will push the balance towards December. Given the demand for USD and sell-off in treasures we suspect that a disappointing read will trigger greater volatility then a strong read. Elsewhere, St. Louis Fed President Bullard and Governor Brainard will be speaking.
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Peter Rosenstreich
EUR/USD has bounced close to the support implied by the recent low (around 1.0836). Hourly supports can now be found at 1.0836 then 1.0812 (21/07/2015). Hourly resistances stand at 1.0888 (intraday high) and 1.0968 (04/11/2015). In the longer term, the technical structure favours a bearish bias as long as resistance holds. Key resistance is located region at 1.1453 (range high) and 1.1640 (11/11/2005 low) is likely to cap any price appreciation. The current technical deteriorations favours a gradual decline towards the support at 1.0504 (21/03/2003 low).
GBP/USD has broken the support at 1.5364 invalidating the recent short-term uptrend and suggesting a deeper corrective phase. Next supports can now be found at 1.5140 (06/10/2015 low) and 1.5110 (30/09/2015 low). Hourly resistances stand at 1.5219 (intraday high). The long-term technical pattern is negative and favours a further decline towards the key support at 1.5089 , as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200 day moving average). However, the general oversold conditions and the recent pick-up in buying interest pave the way for a rebound.
USD/JPY continues to improve. Hourly resistances now stand at 121.98 (intraday high) The short-term technical structure favours a further rise as long as the hourly support at 121.65/70 region holds. Another support lies at 121.40 (05/11/2015low). A long-term bullish bias is favored as long as the strong support at 115.57 (16/12/2014 low) holds. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) is favored. A key support can be found at 116.18 (24/08/2015 low).
USD/CHF has broken the resistance at 0.9957 (28/10/2015 range high and long term decliing trendline), confirming an increasing buying interest. As long as the support at 0.9808 (27/10/2015 low) holds, the technical structure looks to further bullish momentum. Additional hourly support is given at 0.9476 (15/10/2015 low). Resistance is located at 1.000 key psychological level. In the long-term, the pair has broken resistance at 0.9448 and key resistance at 0.9957 suggesting further uptrend. Key support can be found 0.8986 (30/01/2015 low). As long as these levels hold, a long term bullish bias is favoured.
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