Morning Report: USD Strength Ahead Of NFP’s

Key Data Releases Today

0930GMT – GBP Trade Balance exp -£2300 v £1917
0930GMT – GBP Trade Balance Non EU exp £3700 v £3587
0930GMT – GBP Visible Trade Balance exp -£9500 v -£9099
1015GMT – GBP BOE Govenor Mark Carney Speaks in Paris
1100GMT – EUR ECB Announces 3 Year LTRO Repayment
1330GMT – CAD Net Change In Employment exp -5.0k v 74.1k
1330GMT – CAD Unemployment Rate exp 6.9% v 6.8%
1330GMT – USD Change In Non Farm Payrolls exp 235K v 248k 
1330GMT – USD Unemployment Rate exp 5.9% v 5.9%


Overview:

Relatively quiet Asian session after some volatility around the ECB presser yesterday provided the catalyst for new cycle lows for many of the majors. The combination of a dovish Draghi, higher equities, and lower oil prices helped push the DXY onto an 88 print for the first time since mid 2010. EURUSD closed below 1.24, which is bearish. GBPUSD also managed to move away from the 1.60 magnet, breaking through key support at 1.5875. In Japan, there were headlines from economy minister Amari saying that “Excessive JPY weakness or strength are both undesirable” it is worth monitoring the rhetoric going forward.  Elsewhere, we got the SMP from RBA. They left growth forecast unchanged, however they lifted their inflation profile by 0.25% to 2.25-3.25% on the back of recent AUD depreciation. They have retained their view that housing-led growth will see consumption gradually improving on the back of a falling savings rate, which eventually sees non-mining investment improve, taking growth above-trend in 2016. On the day, AUD 0.8540 is a very important level to watch, 50% of the 2008-2011 range.

Looking ahead, the main event today is the US Labour market report. Critical to watch are wages. There have been signs in some of the third-quarter data out last week that employment costs are finally rising. Even if the report disappoints, the market will likely be ready to buy the dips in USD.

EUR closes sub 1.24 on the back of doveish Draghi.
CAD profit taking at year to date highs, bullish inside bars.
GBP break lower from contracting triangle, monitoring confirmation.
JPY weakness persists, year to date highs challenged.
AUD breaks range lows, monitoring range low retest from below.

Key Trades:

EURUSD: Bearish – Revised (stopped on spec longs yesterday)
USDCAD: Bullish – Revised (trailing stops on spec longs)
GBPUSD: Bearish – Revised (tighten trailing stops)
USDJPY: Bullish – No Change (tighten trailing stops)
AUDUSD: Bearish – Revised (monitoring confirmation of range break)

Analysis:

EURUSD: Bearish – Revised

  • Doveish ECB, bearish close sub 1.24
  • Order Flow indicators remain negative although Linear Regression and Psychology are ticking up to test mid points
  • Monitoring retest of broken support to act as resistance, especially if Order Flow indicators turn down from their midpoints

EURO

USDCAD: Bullish – Revised

  • USD profit taking, bullish inside bars at highs
  • Daily Order Flow indicators are pulling back as longs lock in profits ahead of risk event today
  • Corrective price action confirmed with new highs, monitoring for trend continuation
  • Break and close above previous highs has triggered new long positions. Stops trailed ahead of risk event today

loonie

GBPUSD: Bearish – Revised

  • Invalidated bullish scenario with contracting range break lower
  • Trailing stops on shorts to above yesterdays highs
  • Order Flow indicators remain negative, but are ticking up as participants take profits ahead of today’s risk event

CABLE

USDJPY: Bullish – No Change

  • Price retreats from year to date highs
  • Order Flow indicators retreating from bullish elevated levels with profit taking ahead of key risk event today.
  • Monitor Order Flow indicators for retest and hold of midpoints to suggest next rally attempt for new highs
  • Long positions intact with stops trailed below Thursday’s low to lock in significant gains

yen

AUDUSD: Neutral – No Change

  • Range lows broken with daily follow through confirmation
  • Order Flow indicators testing midpoints
  • If price is rejected from range lows and Order Flow indicators hold midpoint retest will set new shorts

aussie

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