Payrolls slightly better than expected; Dollar cannot hold gains

US Payrolls slightly better than expected at 110,000k; unemployment rises to 4.7%. The US dollar briefly strengthens but cannot hold on to gains.

News and Events:
The much awaited Non-Farm Payrolls report was released on Friday, expanding by 110,000, slightly better than the expected 89,000 and much better than the previous -4,000. The unemployment rate rose 0.1% to 4.7% as expected. As a result of the payrolls report, market sentiment now points to a 52% Fed rate cut of 25 basis points in October, compared to 72% prior to Friday’s report. Many analysts warn though that the recent gain in payrolls was the result of more public-sector jobs rather than private sector job creation. With the unemployment rate rising twice in the last three months, the Fed has enough to worry about. The currency market reflected that view as the dollar rose against the majors at the release of the payrolls data; however could not hold on to those gains as investors still remain pessimistic on the short-term outlook for the US economy and the dollar. EURUSD opened on Friday at 1.4136, hit a low of 1.4033 and closed at 1.4138.

Canada’s employment report showed a gain of 51,100, beating the expected 17,500 and up more than double from August’s 23,300. Furthermore, the unemployment rate dropped to 5.9% in September from 6.0% in August. A weakening dollar and higher commodity prices sent the USDCAD pair crashing: opening for the day at 0.9968, hitting a low of 0.9787 and closing at 0.9806.

Today’s Key Issues (time in GMT):

08:30 EC Sentix Investor Confidence SEP 0.20% vs 0.10%
08:30 UK PPI Input s.a. (MoM) SEP 0.20% vs 0.40%
08:30 UK PPI Input NSA (YoY) SEP 1.70% vs 1.30%
08:30 UK PPI Output n.s.a. (MoM) SEP 115.22 vs 114.97
08:30 UK PPI Output n.s.a. (YoY)
08:30 UK PPI Output Core SA (MoM) AUG
08:30 UK Industrial Production (MoM) SEP
08:30 UK PPI Output Core NSA (YoY) Oct-08
08:30 UK Industrial Production (YoY) AUG 11.0B vs 10.4B
08:30 UK Manufacturing Production (MoM) AUG 31.0B vs 29.7B

10:00 GE Factory Orders YoY (nsa) SEP $98.0B vs $56.2B

The Risk Today:

EurUsd Uptrend still in tact, however a very bullish setup above 1.4158. Support holds at 1.4034.

GbpUsd Key support holds at 2.0235 while resistance firmly at 2.0495.

UsdJpy the breakout of the triangle formation of the past couple weeks places a short term target of 117.61. Support holds at 116.40 and key level at 115.85.

UsdChf look for today’s close price. Anything below 1.1807 is bearish; above is bullish.


Resistance and Support:

By James Brandt - ACM Advanced Currency Markets, Geneva, Switzerland