Daily Report: Markets Steadily Await US and Canada Job Data

Markets are as usual steady in Non-farm payroll day ahead of the release. Economists expect 116k expansion in the US job markets in November, a mild improvement from October's 80k. Unemployment rate is expected to be unchanged at 9.0%. There are cases to support an upside surprise in today's report. Wednesday's ADP report showed an impressive 206k growth in the private sector jobs in November versus expectation of 128k. While ADP isn't a ideal leading indicator for NFP, it's still possible that the strength in private job growth could carry through to NFP. Meanwhile, initial jobless claims were also positive as it stayed below 400k level for the first three weeks in November before rising back to 402k in the last week. Consumer confidence indices, including both the Conference Board and University of Michigan indices, posted sharp improvements. While the employment component of ISM manufacturing index showed deterioration to 51.8 in November, it still stayed in expansionary level.

While the NFP would likely post an upside surprise, dollar shouldn't get any benefits off it. This week's sharp rebound in risk sentiments was triggered by joint actions from the six global central banks as well as China's loosening of monetary policy. Dollar was sold off sharply as stocks jumped on Wednesday. Subsequently on Thursday and today, markets were stuck in range. A strong NFP number would likely trigger another round of rally in risk markets and we'd likely see DOW break recent high of 12284. In that case, dollar index should be sent lower though 78 level. In that case we'd likely see EUR/USD takes out 1.3614 resistance to confirm bottoming. Though, note that commodity currencies would remain the stronger ones in case of risk rally. And that means, we'd probably see EUR/AUD dives through 1.3 psychological level.

Nonetheless, note that nothing is certain before it happens. As mentioned in our technical reports, the near term reversals in EUR/USD and GBP/USD are not confirmed yet with 1.3614 and 1.5887 resistance intact. In case of downside disappointment in NFP, we might see DOW back 12000 level would send EUR/USD back below 1.34, back towards 1.3212 low.

Another key report to watch is Canadian employment data. The job market in Canada is expected to rebound from October's -54k contraction to expand 17.2k in November. Unemployment rate is expected to be unchanged at 7.3%. AUD/CAD has been losing upside momentum for some time as seen in weekly MACD even though the upside is still in tact. The sharp pull back from 1.0663 received strong support from 55 weeks EMA and contained downside at 1.0108 and brought rebound in the cross. Canadian dollar will need persistently strong incoming data flow to reverse the trend, or we'd still likely see AUD/CAD making a new high above 1.0663.