Market Analysis: 10 October 2016
By Christala Parmaxi:
NFP missed expectations
The NFP report disappointed on Friday since the US added only 156,000 jobs in September missing the expectations of 175,000. The jobs added for August was revised up to 167,000 against the 151,000 announced last month. The relatively weak jobs number drove the unemployment rate to rise to the 6-months’ high rate of 5%. However, the average hourly earnings met expectations at 0.2%.
The NFP figure was not below the critical level of 150K, which helped the US Dollar to recover some of its losses after the NFP announcement. In general, the greenback lost the strength it had gained over the previous week, ending Friday lower against the Euro for the first time within the week, the Japanese Yen after 8 days of gains and the Swiss Franc. The NFP day wasn’t too bad for the Dollar against the British Pound due to the Flash Crash on Friday morning and against the commodity currencies despite the good economic releases of Canada. The biggest US Dollar decline was recorded against Japanese Yen which had its first winning day against the greenback for the first day within 8 consecutive trading days; the greenback traded -1.03% against the JPY.
The investors and the financial markets are looking closely for the Fed’s next comments on the rate hike since the NFP was not supportive for it. There are two more NFP releases until December’s monetary policy meeting and the big decision of the Fed. Meanwhile, the presidential nominees had their second debate and the election day is getting closer.
Canadian Economic Releases
The Canadian Employment Rate was released at the surprisingly good level of 67.2K beating by far the expectations of 10K. This figure is a 2-year high since the last time that more Canadians were employed within a month was on September 2014. Moreover, later on Friday, the Ivey Purchasing Managers’ Index was released at 58.4 recording 8-month high. Despite the economic indicators of Canada that are getting stronger and Friday’s economic releases of the US were not supportive for the US Dollar, the USDCAD ended the day higher achieving a 7-month high by touching the level of 1.331.
Bank of Japan’s Kuroda
Haruhiko Kuroda had an interview on Bloomberg where he spoke about the Bank’s growth expectations, inflation targets and QQE. The Governor did not hesitate to say that the Bank can lower rates if this is deemed necessary and said that they will continue or even strengthen their monetary easing in the coming months and years to achieve the targeted inflation of 2%; even that it may take slightly longer than expected to reach it. Kuroda also pointed out that the bank is no longer in sustained mild deflation since the bank lending is increasing and the jobless claims index is near the lowest level of the last 2 decades.
Today is a quiet Monday, like most of them are. While Canada, HK and Japan are on holiday, the Eurogroup has its meetings and the German ZEW Economic Sentiment will be released during the European morning tomorrow. Regarding the rest of the week, there are speeches scheduled from FOMC members such as Yellen, Kashkari, Dudley, George etc. while the FOMC meeting minutes will be released on Wednesday at 21:00 server time.
The major OPEC and non-OPEC members are having a second meeting this week in Turkey to discuss further the outcome of their last meeting in Algeria. The meeting is expected to be concluded on Thursday.
The Gopher moved up to the significant level of 104 but it was not able to break it and complete the failure swing pattern on Friday. MACD has just gone positive while its trigger signal is still negative but it is slopping upwards. The Average Directional Index still indicates positive direction while RSI is trending between the equilibrium and the overbought level. The psychological level of 103 seems like a strong support and the price may trend between 103 and 104 until it selects its major direction by breaking one of them. A break of the 104 level would clearly indicate the continuation of the uptrend while the penetration of the 103 price level would open the doors for the next valid support of 102.3.
Shifting on the hourly chart, we can see that the price is moving between Fibo 38.2% and 23.6% retracement levels. On the short term time-frame, we are looking for a penetration of either of them to conclude the next move. Upon a penetration of Fibo 23.6%, we are looking for the target of 104.
The Loonie is still moving on an uptrend above the triple SMAs. We are looking for a possible correction and then a further upside move up to the psychological resistance level of 1.33. The price is moving between Bollinger’s middle and upper band for the last few days while the NFP and Canadian economic releases were not able to penetrate the current move. However, RSI is slopping downwards on bullish territories while MACD and Stochastic are moving to the upside. The risks lay around the resistance of 1.3165 which coincides with SMA50 and SMA100.
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