[B]Talking Points[/B]
• Japanese Yen: Weaker as carry comes back
• Euro: PMI in line but Germany weak
• Pound: PMI weaker but still quite strong
• Canadian Dollar; Employment on tap
• US Dollar: NFP holds the key
Nether the greater than 300 point downdraft in the Dow nor the prospect of stronger than expected US NFP numbers due at 12:30GMT had any negative effect on the EURUSD toady, as the pair recouped most of its losses in early European trade. Despite the fact that the currency is grossly overbought against the greenback, momentum remains with the euro longs as the pair once again targets the 1.4500 figure.
The majority of the players remain skeptical regarding the resiliency of the US economic data. However, there is good evidence to suggest that today’ s NFP report may print north of 100K jobs which would likely ensure the fact that the Fed will remain stationary for the rest of the year. Nevertheless, the market remains in “show me” mode as currency traders foresee further loosening in US monetary policy and continue to buy the EURUSD on every pullback
It will be interesting to see the market reaction should the US employment data prove better than expected. Good employment numbers along with healthy gains in wages would augur well for the upcoming Christmas season and could improve consumer sentiment going forward. We continue to believe that the EURUSD is near the end of its current rally and while it may make another run at the 1.45 figure, any additional gains going forward are likely to be small and slow. The exception to that scenario is of course a much worse than expected NFP result. If the labor market data reflects the recessionary thesis of dollar bears, the EURUSD momentum could regain force as traders will quickly price in more rate cuts from the Fed.
US is not the only North American economy reporting employment figures today. Canada’s numbers will be out as well. With Loonie at multi decade highs, today opens up the prospect of a possible turn in USDCAD if Canadian data disappoints while US figures register an upside surprise. However, any bounce in USDCAD will be short lived unless oil prices begin to recede back into $80/bbl level.
