By GCI Forex Research
Fundamental Outlook at 0800 GMT (EDT + 0400)
USD
The dollar stabilised during the Asia session although trade was light due to a holiday across much of South East Asia. EURUSD traded 1.4184-1.4249, USDJPY 80.61-80.99. Asian equities are significantly stronger after the S&P500 earlier closed +1.9% ahead. Gold retreated slightly to $1387.88/oz at the time of writing, but it remains near record highs. Crude continues to advance and set an overnight high of $87.22/bbl. The Fed’s pledge to “regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information” means that incoming US data is probably now even more important than usual. Our US economists expect +70k for total payrolls and +75k for privates versus consensus of +60k and +80k, respectively, and an unchanged unemployment rate of 9.6%. The latest initial jobless claims surprised to the upside, at 457k, but our economists note this reading covered the final week of October, beyond the sample week for the October payroll report. That said, any results broadly in line with expectations are unlikely to help the dollar in the current environment. But if the payrolls data surprise strongly on the upside, the dollar could temporarily strengthen and both risk-seeking positions and dollar shorts could face some profit taking into the weekend, with USDJPY the most likely beneficiary.
EUR
The ECB kept its policy unchanged as expected and President Trichet’s statement was largely in line with previous comments. Trichet said the policy stance remains accommodative, with medium-term inflationary pressures contained, and policymakers remain on track to examine exit options at the next meeting. He said the ECB could move interest rates before removing all non-standard measures, but beyond that he offered very little further policy guidance. During the Q&A, he dodged several questions on the Fed’s latest decision, the euro and sovereign bond spreads. When asked about the US dollar policy, he said he does not believe the US is pursuing a weak dollar policy. But even as policymakers continue to talk about exit strategies, Eurozone peripheral spreads remain elevated and could keep investors nervous about pushing euro strength too far.
Final revisions for PMI’s across Europe were released with some diverging patterns. Manufacturing numbers were more positive across Germany, France and the Eurozone but the figures for services trended downwards. On a geographical basis, a clear pattern is emerging of struggling peripherals in contrast to Germany, with the other core countries, such as France, sitting somewhere in between.
GBP
The BoE kept its policy rate unchanged as expected and no explanatory statement was offered. Cable jumped following the decision as fears that the BoE could follow in the Fed’s footsteps went unfounded.
Chancellor Osborne commented that the UK economy is “growing faster than expected” but highlighted that there were still broader concerns over the world economy, a situation which remains “choppy”. He did say, though, that Gilt yields show that the UK is “out of the financial danger zone.” While Osborne is confident they will see the austerity measures through, we remain cautious on sterling in the medium term as austerity could hamper growth.
TECHNICAL OUTLOOK
EURUSD BULLISH Rise through 1.4159 triggers another bullish run towards 1.4373. Support is at 1.3992
USDJPY BEARISH Little support below 79.75 till 77.91. Resistance at 81.99
GBPUSD BULLISH Upside potential targets 1.6379 with scope for 1.6458 next. Support comes in at 1.6080.
USDCHF BEARISH Break below 0.9463 would open up the way towards 0.9225. Upside capped at 0.9972
AUDUSD BULLISH Momentum is positive; next resistance at 1.0222, measured target. Support at 0.9891 ahead of 0.9542 reaction low.
USDCAD BEARISH Outlook is bearish; the pair eyes 0.9981 ahead of 0.9820. Resistance at 1.0156.
EURCHF BULLISH Violation of 1.3924 would open up the way towards 1.4041. Near-term support at 1.3540
EURGBP NEUTRAL 0.8942 and 0.8652 mark the near-term directional triggers.
EURJPY BULLISH Upside pressure on 115.68; scope for 116.68 and 119.33 next. Support comes in at 112.83
Forex Daily Market Commentary provided by GCI Financial Ltd.
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