Welcome to Payrolls Friday, let’s get ready to rumble!

Omicron Fears Ebb; USD, Stocks Up; AUD Grinds Lower

Summary: Welcome to Payrolls Friday! The Dollar Index, a popular measure of the US currency’s value against a basket of 5 major rivals edged up to 96.13 from 96.00 yesterday. In the US, claims for unemployment benefits in the latest week bettered estimates at 222,000 against 238,000. This enabled the Greenback to eke out gains versus most of its rivals toward the close of trading in New York. Meantime, while the Omicron variant of the coronavirus spread to more countries, many were better prepared to monitor and control potential outbreaks. Various central bank speakers and some officials echoed Fed President Jerome Powell’s recent hawkish comments on inflation. US Treasury Secretary Janet Yellen, the first woman to head the treasury and an ex-Fed Chair said that it was the Federal Reserve’s job to avert any wage-price spiral. In FX, the Australian Dollar finished as the bigger loser, sliding further to 0.7090 (0.7105 yesterday), its lowest close in a year. The Euro edged lower, finishing little changed at 1.1300 from 1.1312. Sterling grinded higher to 1.3300 from yesterday’s 1.3275. The Dollar rebounded against the Japanese Yen to 113.15 (112.85) as risk aversion receded and US bond yields steadied. Against most Asian and Emerging Market currencies, the Greenback was modestly higher. USD/SGD was last at 1.3695 (1.3657) while the USD/CNH pair (US Dollar-Offshore Chinese Yuan) settled at 6.3735 from 6.3725.

The US 10-year treasury bond yield closed at 1.44% from 1.43% yesterday. Two-year US rates rose to 0.62% (0.56%). Germany’s 10-year Bund yield was last at -0.37% (-0.35%). Japan’s 10-year JGB rate closed at 0.05% from 0.06% yesterday. Australian 10-year note yields slipped to 1.67% from1.72%.

Wall Street stocks rallied with the DOW finishing up 1.85% to 34,670 (34,245), while the S&P 500 added 1.6% to 4,583 from 4,540 yesterday).

Data released yesterday saw New Zealand’s Q3 Overseas Trade Index slump to 0.7% from a previous 3.3%. Australia’s Trade Surplus eased to +AUD 11.22 billion from a downward adjusted previous surplus of +AUD 11.82 billion. Australian Retail Sales matched forecasts at 4.9%. Japan’s Consumer Confidence Index fell to 39.2 against expectations of 40.3. Swiss Annual October Retail Sales slipped to 1.2% from 2.5%, and lower than estimates at 2.2%. Italy’s Monthly Unemployment Rate increased to 9.4% from 9.2%. The Eurozone October PPI rose to 5.4% from a previous upward adjusted 2.8%, and bettering estimates at 3.6%.

• AUD/USD – slip sliding away, the Australian Dollar underperformed, sliding to 0.7090 from 0.7105. Overnight, the AUD/USD pair traded to 0.7084 while the high trade recorded was at 0.7119. The Aussie Battler is now at the mercy of the US Payrolls report, where a strong result will heap more pressure on to the Battler.
• USD/JPY – as risk aversion waned, and equity markets rebounded, so did the USD/JPY pair. Overnight the USD/JPY pair rose to a high at 113.33, settling at 113.15 (112.85 yesterday). US bond yields steadied. The benchmark 10-year closed at 1.44%, supporting the Greenback.
• EUR/USD – The Euro finished little-changed, at 1.1300 from yesterday’s 1.1312. Euro area economic data released yesterday were mixed. The Eurozone PPI beat estimates, rising to 5.4% (3.6%). Italy’s Jobless rate though rose to 9.4% from a previous 9.2%.
• GBP/USD – Sterling edged higher against the US Dollar to 1.3300 from 1.3275. There were no major UK economic data releases yesterday but after 3 days of losses, the British currency steadied. Overnight, the GBP/USD pair traded to a low at 1.3272.

On the Lookout: It all boils down to the US Payrolls report today. Ahead of that though, global services PMIs will be released. Australia kicks off today’s economic data releases with its AIG Construction Index (f/c 57.0, previous was 57.6 – ACY Finlogix). Australia’s November Services PMI follows (f/c 55.7 from 51.8 – ACY Finlogix). Watch this number because expectations are much higher than the previous report. Japan follows with its Jibun Bank Final Services PMI (no f/c, previous was 50.7). China follows with its Caixin November Services PMI (f/c 52.6 from 53.8 – FX Factory). Europe kicks off with French Final Services PMI (f/c 58.2 from 56.6), German Final Services PMI (f/c 53.4 from 52.4), Italian Final Services PMI (f/c 58.2 from 56.6), Eurozone Final Services PMI (f/c 54.7 from 54.6). The UK releases its Final November Services PMI (f/c 58.6 from 59.1). The Eurozone reports its October Retail Sales (m/m f/c 0.3% from -0.3%). Canada kicks off North American data with its November Employment Change (f/c 36,500 from 31,200), Canadian November Unemployment Rate (f/c 6.6% from 6.7%), Canadian Participation Rate (f/c 65.4% from 65.3%). The US releases its November Non-Farms Payrolls report (f/c 563,000 from 531,000), US November Unemployment Rate (f/c 4.5% from 4.6%) and US November Average Hourly Earnings (f/c 0.4% from 0.4%) – All forecasts by ACY Finlogix. The US releases its November Non-Manufacturing PMI (f/c 57 from 58.7) – ACY Finlogix and US Factory Orders (f/c 0.5% from 0.2%).

Trading Perspective: Markets will continue to monitor developments with fresh information from medical and health authorities on the Omicron variant of Coronavirus. We can expect FX to consolidate into the US Payroll report, barring any surprises from Omicron. While there are no central bank speakers scheduled to talk today, watch for comments post the US Payrolls report.
If the Payrolls number matches forecasts at or around the 560,000, the Dollar should ease but downside moves will be limited. A strong Payrolls gain above 600,000 and the Greenback will soar. A weak NFP, around 500,000 or less, and its good night for the Greenback, at least initially. Watch for the Wages number too, which is expected at 0.4%. Any number higher than that, and the US currency will see more broad-based gains.  Its Payrolls Friday folks, and as well-known international boxing ring announcer Michael Buffer shouts out into his mic, “Let’s Get Ready to Rumble”! Happy days!

• AUD/USD – The Aussie extended its slide lower against the Greenback and other rivals. Even at current levels, the Battler has that heavy feel to it. While caution is warranted, a strong US Payrolls number could see 0.70 cents at the snap of a finger. AUD/USD closed at 0.7090 (0.7105 yesterday). Immediate support lies at 0.7080 followed by 0.7050 and 0.7030. Immediate resistance can be found at 0.7120 and 0.7150. Look for consolidation in a likely range between 0.7075-0.7125 today. Be nimble, get ready to rumble.
• EUR/USD – the shared currency edged modestly lower against the Greenback to 1.1300 (1.1312). Like the Aussie, the Euro also has that heavy feel to it even at current levels. That said, a weak US Payrolls report could ignite heavy short covering in the Euro. Immediate support lies at 1.1290 (overnight low 1.1295). The next support comes in at 1.1270 and then 1.1240. On the topside, resistance can be found at 1.1320 and 1.1350 (overnight high 1.1348). Look for consolidation first-up, likely range 1.1275-1.1375. Trade the range shag.
• USD/JPY – against the Yen, the Dollar rallied 0.24% t 113.15 from 112.85 yesterday. The rise in US bond yields and an easing in risk aversion supported the USD/JPY pair. Immediate resistance for today lies at 113.30 (overnight high 113.33). The next resistance is found at 113.60. Immediate support can be found at 112.90, 112.70 and 112.50. Look for the USD/JPY pair to trade in a likely range today, pre-US NFP between 112.70-113.40.

(Source: Finlogix.com)

• GBP/USD – Sterling held its own against the overall stronger Greenback, edging higher to 1.3300 from 1.3275 yesterday. For today immediate resistance can be found at 1.3330 (overnight high at 1.3334). The next resistance level lies at 1.3360 and 1.3390. On the downside, immediate support can be found at 1.3270 (overnight low traded was 1.3272). The next support lies at 1.3240 and 1.3210. We could be in for a choppy ride on the Pound today, initial range – 1.3250 to 1.3350.