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Dollar Surges after NFP, Breaking Out Against Euro

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Dollar rises in early US session after better than expected employment data. It’s now attempting a breakout against Euro. Canadian Dollar is also firmer after job data. On the other hand, Sterling remains one of the weakest for the week, as post BoE selloff continues. But Euro and Swiss Franc are catching up.

Technically, EUR/USD’s breach of 1.1523 support now suggests resumption of whole fall from 1.2265. We’ll now see if it could sustain below 1.15 handle and build up downside momentum further. Meanwhile, we’d also pay attention to whether GBP/USD would follow by breaking through 1.3410 support, and whether USD/JPY would break through 114.69 high.

In Europe, at the time of writing, FTSE is up 0.42%. DAX is up 0.22%. CAC is up 0.89%. Germany 10-year yield is down -0.008 at -0.232. Earlier in Asia, Nikkei dropped -0.61%. Hong Kong HSI dropped -1.41%. China Shanghai SSE dropped -1.00%. Singapore Strait Times rose 0.70%. Japan 10-year JGB yield dropped -0.0182 to 0.064.

US NFP grew 531k in Oct, unemployment rate dropped to 4.6%

US non-farm payroll employment grew 531k in October, better than expectation of 425k. Prior month’s figure was also revised sharply higher from 194k to 312k. Thus far this year, monthly job growth averaged 582k. Total non-farm employment was still -4.2m, or -2.8% from its pre-pandemic level in February 2020.

Unemployment rate dropped from 4.8% to 4.6%, below expectation of 4.7%. Labor force participation rate was unchanged at 61.6%. Average hourly earnings rose 0.4% mom, matched expectations.

Canada employment grew 31.2k in October, above expectation of 19.3k. Unemployment rate dropped to 6.7%, down from 6.9%, below expectation of 6.9%.

Eurozone retail sales dropped -0.3% mom in Sep, EU down -0.2% mom

Eurozone retail sales dropped -0.3% mom in September, versus expectation of 0.2% mom. Volume of retail trade decreased by -1.5% for non-food products, while it rose for food, drinks and tobacco by 0.7% and for automotive fuels by 1.1%.

EU retail sales dropped -0.2% mom. Among Member States for which data are available, the largest monthly decreases in the total retail trade volume were registered in Germany (-2.5%), Finland (-1.9%) and the Netherlands (-1.2%). The highest increases were observed in Estonia (+7.1%), Slovakia (+2.9%) and Luxembourg (+2.3%).

Also released, Germany industrial production dropped -1.1% mom in September, below expectation of 1.1% mom rise. France industrial output dropped -1.3% mom in September, versus expectation of 0.4% mom rise. Italy retail sales rose 0.8% mom in September, versus expectation of 0.7% mom. Swiss Foreign currency reserves dropped to CHF 923B in October.

RBA SoMP: Inflation forecasts upgraded across horizon

As seen in RBA’s Statement on Monetary Policy, 2021 year-average GDP growth forecasts was downgraded from 4.75% to 4.25%. 2022 GDP year-average GDP growth forecast was left unchanged at 5%. 2023 year-average growth forecast was upgraded from 2.75% to 3%.

Headline CPI inflation forecasts were raised across the horizon, with 2021 year-end increased from 2.5% to 3.25%, 2022 year-end increased from 1.75% to 2.25%, 2023 year-end increased from 2.25% to 2.5%. Trimmed mean inflation forecasts were also raised, with 2021 year-end increased from 1.75% to 2.25%, 2022 year-end from 1.75% to 2.25%, 2023 year-end from 2.25% to 2.5%.

2021 year-end unemployment rate forecast was lowered from 5% to 4.75%. 2022 year-end and 2023 year-end unemployment rate forecast was left unchanged at 4.25% and 4% respectively.

Australia AiG services rose to 47.6 in Oct, third month in contraction

Australia AiG Performance of Services rose 1.9 pts to 47.6 in October, marking a third month in contraction. Sales rose 13.8 to 55.2. Employment rose 4.8 to 56.8. New orders dropped -1.0 to 38.8. supplier deliveries dropped -7.5 to 39.5. Finished stocks dropped -13.7 to 39.8. Capacity utilization dropped -1.7 to 74.5. Input prices rose 9.1 to 73.6. Selling prices rose 7.8 to 61.7. Average wages rose 9.1 to 68.3.

Ai Group Chief Executive, Innes Willox, said: “The Australian services sector reported mixed fortunes in October… Across the services sector, sales and employment were higher in October while new orders were discouragingly low. A more robust recovery was inhibited by lingering activity restrictions, barriers to interstate movement and the same disruptions to the supply of inputs that are being felt in other parts of the economy… Services companies reported further strong rises in input prices and wages with selling prices also rising although not by enough to prevent additional pressure on margins.”

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1517; (P) 1.1567; (R1) 1.1605; More

EUR/USD’s break of 1.1523 suggests resumption of fall from 1.2265, and that from 1.2348 too. Intraday bias is back on the downside for 61.8% projection of 1.1908 to 1.1523 from 1.1691 at 1.1453. Break will pave the way to 100% projection at 1.1306. On the upside, though, above 1.1615 minor resistance will delay the bearish case and turn bias neutral first.

In the bigger picture, price actions from 1.2348 should at least be a correction to rise from 1.0635 (2020 low). As long as 1.1908 resistance holds, deeper fall would be seen to 61.8% retracement of 1.0635 to 1.2348 at 1.1289. Nevertheless break of 1.1908 resistance will revive medium term bullishness and turn focus back to 1.2348 high.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
21:30 AUD AiG Performance of Services Index Oct 47.6 45.7
23:30 JPY Overall Household Spending Y/Y Sep -1.90% -3.90% -3.00%
00:30 AUD RBA Monetary Policy Statement
07:00 EUR Germany Industrial Production M/M Sep -1.10% 1.10% -4.00% -3.50%
07:45 EUR France Industrial Output M/M Sep -1.30% 0.40% 1.00%
08:00 CHF Foreign Currency Reserves (CHF) Oct 923B 939B
09:00 EUR Italy Retail Sales M/M Sep 0.80% 0.70% 0.40%
10:00 EUR Eurozone Retail Sales M/M Sep -0.30% 0.20% 0.30% 1.00%
12:30 USD Nonfarm Payrolls Oct 531K 425K 194K 312K
12:30 USD Unemployment Rate Oct 4.60% 4.70% 4.80%
12:30 USD Average Hourly Earnings M/M Oct 0.40% 0.40% 0.60%
12:30 CAD Net Change in Employment Oct 31.2K 19.3K 157.1K
12:30 CAD Unemployment Rate Oct 6.70% 6.90% 6.90%
14:00 CAD Ivey PMI Oct 71.2 70.4

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