GREENBACK STRENGTHENS BEFORE IMPORTANT NFP NUMBERS
The US markets ended the day sharply lower yesterday as traders continued to worry about the bond markets. The ADP released jobs number for September which jumped to 230K – sharply higher than the expected 187K. Today, traders will receive official numbers from the government. These will mostly focus on headline numbers and wages. A rise in wages will increase the chances of tightening by the Fed, which will lead to higher rates.
The dollar index continued to rise as traders waited for today’s jobs numbers. It also rose after a series of positive economic data. The factory order numbers released yesterday were better than expected estimates. In August, factory orders rose by 2.3%, which was higher than the 2.1% traders were expecting. The durable goods data rose by 4.4%, which was lower than the 4.5% traders were expecting.
The Canadian Dollar fell against the USD after a sharp increase on Monday following the breakthrough in NAFTA negotiations. These declines were mostly because of the strong USD. Today, traders will receive the employment numbers from Canada. The unemployment rate is expected to drop to 5.9% from the previous 6.0%. The participation rate is expected to increase to 65.4% from the previous 65.3% while the net employment change is expected to be at 30K.
The Swiss franc has lost significantly against the USD. This follows the SNB’s promise to leave rates unchanged in the negative territory. Today, Switzerland will release important data. The consumer inflation is expected to have risen by 1.1% in September, which will be lower than August’s 1.2%. On a monthly basis, it is expected to rise by 0.2%. The core CPI, which excludes major products is expected to rise to an annualized rate of 0.6%, which will be higher than last month’s 1.5%.
The EUR/USD pair gained slightly in the Asian session. It reached an intraday high of 1.1540 as traders waited for the US employment data. On the four-hour chart below, the technical indicators show that the pair’s path of least resistance is down. The current price is at the 38.2% Fibonacci Retracement level where it is finding a resistance. If it moves lower, it will find another resistance at the 1.1420 level.
The USD/CHF pair continued the upward momentum started in September. Today, it reached an intraday high of 0.9925. As shown in the chart below, the momentum is currently with the dollar, which will likely continue. However, as the pair inches closer to parity, traders should expect it to find resistance. This means that the sharp rally will likely be halted when the parity is reached as traders ponder what will happen next.
The USD/CAD recovered all of the losses from Monday’s sharp decrease. It reached an intraday high of 1.2936. This happened as the pair moved past the important consolidation level of 1.2840. Today’s jobs numbers will make it one of the most volatile pairs. Strong US jobs numbers will take the pair higher. Strong numbers from the US and Canada will have mixed reactions from the market. This means that the pair will likely test the 1.2940 or the 1.2840 levels.