Non Farm Payrolls Lifts Dollar

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Non Farm Payrolls Lifts Dollar

Dollar Index Surges From 18 Month Low

The Non Farm Payrolls data was stronger than expected but not all that strong. It came in at 209,000 with positive revision to previous months and right in the markets sweet spot. The number at once reaffirms current economic outlook and relieves the market of some near term fear. The fear, that the FOMC will raise interest rates again, this year and/or too soon. The reality, the FOMC has indicated no rush to raise rates again and this figure does very little to push them in that direction. It keeps them on track, it just doesn’t accelerate the time line.

Internals of the report are also positive. The unemployment fell a tenth to 4.3% and the lowest level in 16 years while labor force participation hovers at post-recession highs. Both numbers suggesting ever tightening labor markets. The really positive number within the report is the average hourly earnings. Monthly growth was tepid at 0.31% and well below what the Fed would call alarming while YOY growth was modest at 2.5% suggesting that the consumer is getting stronger as well.

The dollar made the largest move on the news, surging nearly 1% from a 1.5 year low. The move is no guarantee of reversal but a positive sign for dollar bulls. The index created a long green candle moving up from strong support and engulfing the 4 previous candles. Momentum has shifted to the upside with a bullish crossover on the move indicating additional upside should be expected in the near term at least. Upside target for resistance is just below $95 at the 30 day exponential moving average and may be strong.

Looking forward there are headwinds facing the dollar. For one the NFP is a only one report and to date other signs of strength have done little to reinforce hawkish outlook or bullish behavior. For another ECB outlook is also firming and could easily undermine the impact of today’s data. The ECB has already indicated a willingness to begin discussing taper and the beginning of easy-money policy unwind, positive data will bolster that outlook firm the euro and drag on the dollar.

The EUR/USD is showing signs of reversing as well. The pair moved up to a 2.5 year high prior to the release and then fell hard in the aftermath. The candle created on the daily charts is a bearish Dark Cloud Cover backed up by bearish crossovers on MACD and stochastic. The candle created on the weekly chart is a wickedly sharp pinbar/shooting star confirming resistance at the top of the 2.5 year trading range. Without something to support it the pair is likely to fall to support levels with targets at 1.1500 and 1.2500.

Surge In U.S. Non-farm Payrolls Lifts Dollar

The U.S. dollar was notably higher against its major trading partners in the European session on Friday, as the economy created much more jobs than forecast in the month of November, supporting hopes for the Federal Reserve to keep policy unchanged when it meets next week.

Data from the Labor Department showed that U.S. job growth was in a substantial acceleration in November. The report said non-farm payroll employment surged by 266,000 jobs in November after climbing by an upwardly revised 156,000 jobs in October.

Economists had expected an increase of about 180,000 jobs compared to the addition of 128,000 jobs originally reported for the previous month.

The unemployment rate edged down to 3.5 percent in November from 3.6 percent in October. The unemployment rate was expected to remain unchanged.

The Federal Reserve’s final rate setting meeting of the year is due next week. The Central Bank is expected to keep rates on hold at 1.50-1.75 percent.

Investors focused on developments in China-U.S. trade front after President Donald Trump commented that the talks were “moving right along.”

Trump’s remarks came after Beijing asserted that some U.S. tariffs should be rolled back as part of an interim deal. U.S. Treasury Secretary Steven Mnuchin said that both sides are “actively working” towards a deal, but the U.S. is not bound to a deadline.

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The currency held steady against its major counterparts in the Asian session, except the franc.

The greenback appreciated to 108.92 against the yen, up by 0.4 percent from a 2-day low of 108.50 set at 8:30 am ET. The pair was worth 108.76 when it ended deals on Thursday. Should the greenback strengthens further, it is likely to face resistance around the 111.00 region.

Data from the Cabinet Office showed that Japan’s leading index fell to the lowest level in nearly ten years in October.

The leading index, which measures the future economic activity, came in at 91.8 in October, down from 91.9 in September.

The greenback spiked up to a 3-day high of 0.9918 against the franc, representing a 0.5 percent rise from a 2-day low of 0.9865 it touched at 3:15 am ET. At Thursday’s close, the pair was valued at 0.9868. The greenback is seen finding resistance around the 1.01 level.

After falling to a 2-day low of 1.1110 at 3:00 am ET, the greenback turned higher against the euro, rising 0.4 percent to a 2-day high of 1.1068. The pair had closed Thursday’s deals at 1.1078. Continuation of the greenback’s uptrend may lead it to a resistance around the 1.09 region.

Data from Destatis showed that German industrial production declined unexpectedly in October.

Industrial production decreased 1.7 percent on a monthly basis in October, bigger than the revised 0.6 percent fall logged in September. Economists had forecast output to recover 0.1 percent.

The greenback reached as high as 1.3111 against the pound, after having dropped to 1.3165 at 1:45 am ET. The pound-greenback pair had finished yesterday’s trading session at 1.3157. Next key resistance for the greenback is possibly found around the 1.30 level.

Data from the Lloyds Bank subsidiary Halifax and IHS Markit showed that UK house prices increased at the fastest pace in seven months in November.

House prices increased 2.1 percent on a yearly basis in three months to November, following a 0.9 percent rise in three months to October. Economists had forecast an annual growth of 1 percent.

The greenback staged a brief rebound to 0.6833 against the aussie, from a 2-day low of 0.6857 it recorded at 8:15 am ET. Further rise in the currency could test resistance around the 0.67 area.

Data from the Australian Industry Group and Housing Industry Association showed that Australia’s construction sector contracted further in November.

The Performance of Construction Index fell 3.9 points to 40.0 in November. A score below 50 indicates contraction in the sector.

Following a 4-month low of 0.6574 seen at 8:15 am ET, the greenback recovered modestly against the kiwi, with the pair trading at 0.6560. At yesterday’s trading close, the pair was quoted at 0.6543. The greenback is likely to face resistance around the 0.64 region, if it rallies again.

The greenback was up 0.7 percent at a 2-day high of 1.3258 against the loonie, bouncing off from a low of 1.3171 it logged at 4:00 am ET. The greenback was trading at 1.3174 per loonie at yesterday’s close. The greenback is poised to challenge resistance around the 1.35 mark.

Surge In U.S. Non-farm Payrolls Lifts Dollar

Posted by: Insta Forex in Forex Analysis December 7, 2020

The U.S. dollar was notably higher against its major trading partners in the European session on Friday, as the economy created much more jobs than forecast in the month of November, supporting hopes for the Federal Reserve to keep policy unchanged when it meets next week.

Data from the Labor Department showed that U.S. job growth was in a substantial acceleration in November. The report said non-farm payroll employment surged by 266,000 jobs in November after climbing by an upwardly revised 156,000 jobs in October.

Economists had expected an increase of about 180,000 jobs compared to the addition of 128,000 jobs originally reported for the previous month.

The unemployment rate edged down to 3.5 percent in November from 3.6 percent in October. The unemployment rate was expected to remain unchanged.

The Federal Reserve’s final rate setting meeting of the year is due next week. The Central Bank is expected to keep rates on hold at 1.50-1.75 percent.

Investors focused on developments in China-U.S. trade front after President Donald Trump commented that the talks were “moving right along.”

Trump’s remarks came after Beijing asserted that some U.S. tariffs should be rolled back as part of an interim deal. U.S. Treasury Secretary Steven Mnuchin said that both sides are “actively working” towards a deal, but the U.S. is not bound to a deadline.

The currency held steady against its major counterparts in the Asian session, except the franc.

The greenback appreciated to 108.92 against the yen, up by 0.4 percent from a 2-day low of 108.50 set at 8:30 am ET. The pair was worth 108.76 when it ended deals on Thursday. Should the greenback strengthens further, it is likely to face resistance around the 111.00 region.

Data from the Cabinet Office showed that Japan’s leading index fell to the lowest level in nearly ten years in October.

The leading index, which measures the future economic activity, came in at 91.8 in October, down from 91.9 in September.

The greenback spiked up to a 3-day high of 0.9918 against the franc, representing a 0.5 percent rise from a 2-day low of 0.9865 it touched at 3:15 am ET. At Thursday’s close, the pair was valued at 0.9868. The greenback is seen finding resistance around the 1.01 level.

After falling to a 2-day low of 1.1110 at 3:00 am ET, the greenback turned higher against the euro, rising 0.4 percent to a 2-day high of 1.1068. The pair had closed Thursday’s deals at 1.1078. Continuation of the greenback’s uptrend may lead it to a resistance around the 1.09 region.

Data from Destatis showed that German industrial production declined unexpectedly in October.

Industrial production decreased 1.7 percent on a monthly basis in October, bigger than the revised 0.6 percent fall logged in September. Economists had forecast output to recover 0.1 percent.

The greenback reached as high as 1.3111 against the pound, after having dropped to 1.3165 at 1:45 am ET. The pound-greenback pair had finished yesterday’s trading session at 1.3157. Next key resistance for the greenback is possibly found around the 1.30 level.

Data from the Lloyds Bank subsidiary Halifax and IHS Markit showed that UK house prices increased at the fastest pace in seven months in November.

House prices increased 2.1 percent on a yearly basis in three months to November, following a 0.9 percent rise in three months to October. Economists had forecast an annual growth of 1 percent.

The greenback staged a brief rebound to 0.6833 against the aussie, from a 2-day low of 0.6857 it recorded at 8:15 am ET. Further rise in the currency could test resistance around the 0.67 area.

Data from the Australian Industry Group and Housing Industry Association showed that Australia’s construction sector contracted further in November.

The Performance of Construction Index fell 3.9 points to 40.0 in November. A score below 50 indicates contraction in the sector.

Following a 4-month low of 0.6574 seen at 8:15 am ET, the greenback recovered modestly against the kiwi, with the pair trading at 0.6560. At yesterday’s trading close, the pair was quoted at 0.6543. The greenback is likely to face resistance around the 0.64 region, if it rallies again.

The greenback was up 0.7 percent at a 2-day high of 1.3258 against the loonie, bouncing off from a low of 1.3171 it logged at 4:00 am ET. The greenback was trading at 1.3174 per loonie at yesterday’s close. The greenback is poised to challenge resistance around the 1.35 mark.

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