USD reverses losses ahead of NFPs report

Market Brief

The Brazilian real extended losses yesterday as traders struggled to decide whether the removal of Dilma Rousseff would trigger a wave of optimism amongst investors. USD/BRL tested the top of its declining channel but was unable to break the 3.26 resistance level to the upside. We maintain our view that the real is quite vulnerable now that the hype surrounding the impeachment process slowly dies down.

In South Korea, the won reversed yesterday’s losses, which were triggered by a weak inflation report and a disappointing manufacturing PMI, after South Korea’s second quarter GDP was revised to the upside from 3.2%y/y to 3.3%. USD/KRW eased to 1,116.40, down 0.50% from yesterday. Over the medium-term, the currency pair continues to trade sideways. A break of the 1,111 level will be needed to resume the dollar debasement.

Yesterday USD/JPY was heavily sold-off amid disappointing ISM manufacturing. The index moved below the 50 threshold - that separates contraction from expansion - for the first time since February this year, falling 3.2 points to 49.4 in August. The report suggest that the recent improvement in the manufacturing sector was more a stabilisation than a sustainable recovery, raising questions about the outlook, especially now that the Fed is back with its rate hike story. Today’s NFPs could be a game changer, especially if it comes in well below the 180k median forecast as it would raise concerns about the ability of the US economy to weather smoothly an interest rate hike. USD/JPY got some colour back during the Asian session as it surged 0.35% to 103.62.

Asian equity returns were mixed on Friday as Japanese shares moved back and forth across the neutral threshold with the Nikkei 225 edging down 0.01%. In mainland China, the Shanghai Composite was up 0.08%, while tech shares were under selling pressure with the Shenzhen Composite falling 0.35%. Offshore, Hong Kong’s Hang Seng was up 0.53%, while Taiwan’s Taiex was off 0.15%. Finally, European futures were broadly trading in positive territory with the Footsie up 0.40%, the DAX rising 0.44% and the SMI surging 0.43%.

Today traders will be watching unemployment rate from Spain and Norway; GDP from Italy; industrial production from Brazil; trade balance, Nonfarm payrolls, unemployment rate, participation rate, average hourly earnings, factory orders and durable goods orders from the US. Fed’s Lacker will also address a speech in Richmond.

 

Global Indexes	Current Level	% Change
Nikkei 225 Index	16925.68	-0.01
Hang Seng Index	23285.14	0.53
Shanghai Index	3065.903	0.08
FTSE futures	6772	0.4
DAX futures	10569.5	0.44
SMI Futures	8166	0.43
S&P future	2166.9	-0.02

 

Global Indexes	Current Level	% Change
Gold	1310.2	-0.28
Silver	18.85	-0.26
VIX	13.48	0.45
Crude wti	43.52	0.83
USD Index	95.73	0.08

 

Today's Calendar	Estimates	Previous	Country/GMT
SP Aug Unemployment MoM Net ('000s)	3,4	-84	EUR/07:00
SW 2Q Current Account Balance	-	64.3b	SEK/07:30
RU Aug 26 Money Supply Narrow Def	-	8.73t	RUB/08:00
NO Aug Unemployment Rate	3,10%	3,20%	NOK/08:00
BZ Aug FIPE CPI - Monthly	0,05%	0,35%	BRL/08:00
IT 2Q F GDP WDA QoQ	0,00%	0,00%	EUR/08:00
IT 2Q F GDP WDA YoY	0,70%	0,70%	EUR/08:00
UK Aug Markit/CIPS UK Construction PMI	46,3	45,9	GBP/08:30
EC Jul PPI MoM	0,10%	0,70%	EUR/09:00
EC Jul PPI YoY	-2,90%	-3,10%	EUR/09:00
BZ Jul Industrial Production MoM	0,00%	1,10%	BRL/12:00
BZ Jul Industrial Production YoY	-7,00%	-6,00%	BRL/12:00
US Jul Trade Balance	-$41.4b	-$44.5b	USD/12:30
CA 2Q Labor Productivity QoQ	-0,40%	0,40%	CAD/12:30
CA Jul Int'l Merchandise Trade	-3.30b	-3.63b	CAD/12:30
US Aug Change in Nonfarm Payrolls	180k	255k	USD/12:30
US Aug Two-Month Payroll Net Revision	-	18k	USD/12:30
US Aug Change in Private Payrolls	180k	217k	USD/12:30
US Aug Change in Manufact. Payrolls	-3k	9k	USD/12:30
US Aug Unemployment Rate	4,80%	4,90%	USD/12:30
US Aug Average Hourly Earnings MoM	0,20%	0,30%	USD/12:30
US Aug Average Hourly Earnings YoY	2,50%	2,60%	USD/12:30
US Aug Average Weekly Hours All Employees	34,5	34,5	USD/12:30
US Aug Change in Household Employment	-	420	USD/12:30
US Aug Labor Force Participation Rate	-	62,80%	USD/12:30
US Aug Underemployment Rate	-	9,70%	USD/12:30
US Aug ISM New York	-	60,7	USD/13:45
DE Aug Foreign Reserves	449	449,9	DKK/14:00
US Jul Factory Orders	2,00%	-1,50%	USD/14:00
DE Aug Change in Currency Reserves	-	-2.4b	DKK/14:00
US Jul Factory Orders Ex Trans	-	0,40%	USD/14:00
US Jul F Durable Goods Orders	4,40%	4,40%	USD/14:00
US Jul F Durables Ex Transportation	1,50%	1,50%	USD/14:00
US Jul F Cap Goods Orders Nondef Ex Air	-	1,60%	USD/14:00
US Jul F Cap Goods Ship Nondef Ex Air	-	-0,40%	USD/14:00
US Fed's Lacker Speaks on Interest Rate Benchmarks in Richmond	-	-	USD/17:00

 

Currency Tech

EURUSD
R 2: 1.1616
R 1: 1.1428
CURRENT: 1.1194
S 1: 1.1046
S 2: 1.0913

GBPUSD
R 2: 1.3534
R 1: 1.3372
CURRENT: 1.3270
S 1: 1.2851
S 2: 1.2798

USDJPY
R 2: 107.90
R 1: 105.63
CURRENT: 103.60
S 1: 99.02
S 2: 96.57

USDCHF
R 2: 1.0328
R 1: 0.9956
CURRENT: 0.9803
S 1: 0.9522
S 2: 0.9444

• S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot