Euro slammed on Draghi comments BUT we are all waiting on US non-farms

Quick Recap

The ECB, Euro and Mario Draghi were the highlights last night with the Euro coming under pressure but European stocks getting support from the central bank’s pledge to never ending QE.

If you recall the ECb originally made a promise to keep QE going untill around this time next year but also said they would keep going until inflation hit their target. That was reiterated last night with the ECB saying in its statement that QE will continue  “until the end of September 2016, or beyond.”

Beyond! One very important word which knocked the Euro under 1.11 at one point last night and reminded Euro stock traders that free money is still here to stay.

Likely though EU stock traders, who did really pump up prices last night, might be not so excited about the fall in US stocks for most of the day which left prices for the Dow and S&P 500 only just in the black and the Nasdaq in the red.

But it’s really all ab0ut the US non-farm payrolls tonight and what that will imply, if anything, for the Fed when it makes its decision on interest rates in a little under 2 weeks. The market is expecting a rise of 220,000. But ray Attrill the NAB’s co-head of currency strategy highlighted earlier this week that August payrolls have recently undershot expectations on the first read only to be subsequently revised up in the months following the original release. The difference of about 40,000 jobs is material enough to move the market if we see an undershot tonight.  But my colleague from BI US Myles Udland reports today that Goldman Sachs thinks Friday’s jobs report could be huge. As they say, ‘we have a market’.  We’ll know at 10.30pm AEST.

Elsewhere the Aussie is holding in on above 70 cents really well. As I wrote at BI this morning:

Investing.com-AUDUSD-60-minute-04092015

My sense is there is some sort of structure below these levels keeping the Aussie up as the bank/trader/fund protects their position. In a note yesterday, Westpac highlighted also that it could simply be that the Aussies weakness which took it under 70 cents briefly this week is excessive. Here’s what Westpac’s Global Strategy Group said:AUD/USD has been ‘living in the seventies’ for most of this year and given nerves over China and soggy Australian data, has now traded with a 0.69 handle. Fresh post-2009 lows are likely but iron ore prices suggest AUD bearishness is a little excessive.

The overnight scoreboard (7.17am AEST):

• Dow Jones +0.14% to 16,375
• Nasdaq -0.35% to 4,733
• S&P 500 +0.12% to 1,951
• London (FTSE 100) +1.82% to 6,194
• Frankfurt (DAX) +2.69% to 10,318
• Tokyo (Nikkei) +0.48% to 18,182
• Shanghai (composite) closed
• Hong Kong (Hang Seng) closed
• ASX Futures overnight (SPI September) +17 5,021
• AUDUSD: 0.7008
• EURUSD: 1.1123
• USDJPY: 120.06
• GBPUSD: 1.5253
• USDCAD: 1.3180
• Nymex Crude (front contract): $46.64
• Copper (US front contract): $2.38
• Gold: $1,124
• Dalian Iron Ore (September): 465 (denominated in CNY)
• US 10 year bond rate: 2.16%
• Australian 10 year bond rate: 2.68%

On the day – US non-farm payrolls

On the data front today there is nothing material in Australia or Asia and only factory orders in Germany are noteworthy in the lead up to non-farms at 10.30pm AEST tonight. Canadian employment data is also out at the same time tonight.

CHART OF THE DAY: EURJPY – right on support 126 in the frame

This is one of my favourite pairs at the moment. I’ve been expecting this move back to support.

The question of course is will it hold?

We should always respect these levels unless or until they break. But, if it gives way 125/126 is my target.