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Dollar Weakens Against on Job Contraction, Downside Limited So Far

Dollar appears to be turning weaker again after non-farm payroll report showed the first contraction since April. Euro is currently following as second weakest for the than, than Canadian, which was also weighed down by employment data. On the other hand, Sterling is starting to reverse some of this week’s losses while Swiss Franc also strengthens.

Technically, while Dollar turns softer, the steep decline in Gold today will likely provide a temporary floor. EUR/USD is unlikely to break through 1.2348 before weekend. Instead, AUD/USD might have a slighter better prospect of breaking through 0.7819 temporary top.

In Europe, currently , FTSE is down -0.15%. DAX is up 0.72%. CAC is up 0.49%. German 10-year yield is up 0.0270 at -0.525. Earlier in Asia, Nikkei rose 2.36%. Hong Kong HSI rose 1.20%. China Shanghai SSE dropped -0.17%. Singapore Strait Times rose 2.97%. Japan 10-year JGB yield dropped -0.0014 to 0.039.

US NFP employment dropped -140k, unemployment rate unchanged at 6.7%

US non-farm payroll employment contracted -140k in December, well below expectation. That’s the first decline in jobs since April. Though, prior month’s figure was revised up from 245k to 336k.

Unemployment rate was unchanged at 6.7%, below expectation of 6.8%, with 10.7m people unemployed. Labor force participation rate was unchanged at 61.5%. Average hourly earnings rose 0.8% mom, above expectation of 0.2% mom.

Canada employment dropped -63k, or -0.3%, in December, much worse than expectation of -32.5k, and the first contraction since April. Unemployment rate ticked up to 8.6%, from November’s 8.5%.

Eurozone unemployment rate dropped to 8.3% in Nov, EU down to 7.5%

Eurozone unemployment rate dropped to 8.3% in November, down from 8.4%, better than expectation of 8.5%. EU employment also dropped to 7.5%, down from 7.6%. Eurostat estimates that 15.933 million men and women in the EU, of whom 13.609 million in the euro area, were unemployed in November.

Released earlier today, Germany industrial production rose 0.9% mom in November, versus expectation of 0.7% mom. Trade surplus narrowed to EUR 16.4B, smaller than expectation of EUR 18.5B.

From France, industrial output dropped -0.9% mom in November, versus expectation of -1.2% mom. Consumer spending dropped -18.9% mom, versus expectation of -15.0%. Trade deficit narrowed to EUR -3.6B in November, versus expectation of EUR -4.5B.

From Swiss, foreign currency reserves rose to CHF 891B in December.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2229; (P) 1.2286; (R1) 1.2328; More…

EUR/USD recovers after drawing support from 1.2214 minor support. But upside is limited well below 1.2348 temporary top. Intraday bias remains neutral first and further rise is still in favor. On the upside, break of 1.2348 will resume larger up trend for 61.8% projection of 1.0635 to 1.2011 from 1.1602 at 1.2452 next. Though, considering bearish divergence condition in 4 hour MACD, break of 1.2214 will suggest short term topping. Intraday bias will be turned back to the downside, for pull back to 1.2058 support.

In the bigger picture, rise from 1.0635 is seen as the third leg of the pattern from 1.0339 (2017 low). Further rally could be seen to cluster resistance at 1.2555 next, (38.2% retracement of 1.6039 to 1.0339 at 1.2516). This will remain the favored case as long as 1.1602 support holds. We’d be alerted to topping sign around 1.2516/55. But sustained break there will carry long term bullish implications.

Economic Indicators Update

23:30JPYOverall Household Spending Y/Y Nov1.10%-1.00%1.90%
05:00JPYLeading Economic Index Nov P96.696.694.3
07:00EURGermany Industrial Production M/M Nov0.90%0.70%3.20%
07:00EURGermany Trade Balance (EUR) Nov16.4B18.5B18.2B
07:45EURFrance Trade Balance (EUR) Nov-3.6B-4.5B-4.8B-4.6B
07:45EURFrance Consumer Spending M/M Nov-18.90%-15.00%3.70%3.90%
07:45EURFrance Industrial Output M/M Nov-0.90%-1.20%1.60%1.90%
08:00CHFForeign Currency Reserves (CHF) Dec891B876B877B
10:00EURItaly Unemployment Nov8.90%10.00%9.80%9.50%
10:00EUREurozone Unemployment Rate Nov8.30%8.50%8.40%
13:30USDNonfarm Payrolls Dec-140K100K245K336 K
13:30USDUnemployment Rate Dec6.70%6.80%6.70%
13:30USDAverage Hourly Earnings M/M Dec0.80%0.20%0.30%
13:30CADNet Change in Employment Dec-62.6K-32.5K62K
13:30CADUnemployment Rate Dec8.60%8.70%8.50%
15:00USDWholesale Inventories Nov F-0.10%-0.10%
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