US jobs report in focus, SNB's relief

Forex News and Events

All about expectations (by Arnaud Masset)

After yesterday sharp EUR rally - thanks to the ECB - the market braces itself for the US jobs report due later this afternoon. After last month’s strong reading (271k gains in payrolls), the market expects the Bureau of Labor Statistics to deliver a weaker reading of 200k (median forecast). Obviously, the stakes are high since a stronger reading would seal a rate hike by the Federal Reserves in December. For the moment, the market has already priced in a liftoff this month (probability for a rate hike reached 75% - extracted from the OIS rate). From our standpoint, the risk is on the downside for the US dollar as a catastrophic result would shake investors’ confidence in the upcoming tightening. Liftoff is already priced in. However, it is worth mentioning that the ECB had made the life easier for the Fed as Janet Yellen made clear that the USD strength was one of the main factor that could prevent the central bank to move into action. For now, EUR/USD is trading sideways around 1.09 ahead of today’s NFPs.

SNB set to react to Draghi (by Yann Quelenn)

Markets overpriced Draghi’s actions before the ECB meeting. President Mario Draghi has decided to lower the deposit facility rate to -0.3% from -0.2%, to extend the current quantitative easing to March 2017 (when the markets was pricing an extension of at least a year) and has finally decided to maintain unchanged, against all odds, the pace of the QE. Markets have largely been disappointed by Draghi and while the EURUSD has flown slightly below 1.1000, stocks markets ended up the session very negative with most indices below -3%.

The Swiss National Bank looked closely at Draghi’s conference as the Swiss economy is largely dependent on the European economy. Despite the ECB actions was below expectations, the EURCHF has remained stable. We believe that there has been an offset between the too high QE expectations from Draghi that drove back EUR higher and the Swiss safe haven status which drove also the CHF higher as general uncertainties – both economic and political – persist.

It leaves some room to the SNB to act but we still consider that the QE won’t be the answer to the current European crisis. As a result, we believe that the current QE will not have the expected effect. European growth won’t be created out of this monetary policy. Only European countries’ debt will go much higher as what is currently happening in US and Japan. Over the medium term, the EURCHF will be pushed downside. Consequently, we await an action from the SNB to prevent the fatal strengthening of the Swiss Franc.v

EUR/USD - Sharp Reversal

The Risk Today

Yann Quelenn

EUR/USD has spiked below 1.1000 and has erased the downtrend channel. Hourly support lies at 1.0566 (intraday low). Hourly resistance can be found at 1.1096 (28/10/2015 high). Expected to show further consolidation. In the longer term, the technical structure favours a bearish bias as long as resistance holds. Key resistance is located region at 1.1453 (range high) and 1.1640 (11/11/2005 low) is likely to cap any price appreciation. The current technical deteriorations favours a gradual decline towards the support at 1.0504 (21/03/2003 low).

GBP/USD's downside momentum remain lively despite the yesterdays' sharp reversal. Hourly resistance is given at 1.5336 (19/11/2015 high). Strong resistance can be found at 1.5529 (22/09/2015 high). Expected to show further weakness. The long-term technical pattern is negative and favours a further decline towards the key support at 1.5089 , as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200 day moving average). However, the general oversold conditions and the recent pick-up in buying interest pave the way for a rebound.

USD/JPY remains between hourly resistance at 123.76 (18/11/2015 high) and hourly support at 122.23 (16/11/2015 low). Expected to monitor support at 122.23. A long-term bullish bias is favored as long as the strong support at 115.57 (16/12/2014 low) holds. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) is favored. A key support can be found at 116.18 (24/08/2015 low).

USD/CHF has declined sharply. Hourly support is now given at 0.9806 (27/10/2015 low) while hourly resistance is given at 1.0328 (27/11/2015 high). Expected to show further cosnsolidation. In the long-term, the pair has broken resistance at 0.9448 and key resistance at 0.9957 suggesting further uptrend. Key support can be found 0.8986 (30/01/2015 low). As long as these levels hold, a long term bullish bias is favoured.

Resistance and Support: