Job growth strong (revisions included), but….

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Forex news for New York trading on November 3, 2017.

In other markets at the end of the week a snapshot shows:

  • Spot gold down $5.61 or -0.44% at $1270.63
  • WTI crude oil futures up  $1.17 or 2.15% at $55.70.
  • US treasury yields are ending the day lower: 2-year 1.6125%, up 0.4 basis points.  5-year 1.991%, -0.8 basis points.  10 year 2.3307%, -1.4 basis points.   30-year  2.812%, -1.3 basis points
  • US stocks ended higher: S&P index +0.31%.  NASDAQ up 0.74%.  Dow up 0.10%.

Today was unemployment day in the US and Canada.  

First in the US, the nonfarm payroll jobs increased by less than expected 261K versus 313 K.  However  there was a revision to the prior two months of +90K.  So that offset the current month miss.  The unemployment rate fell to 4.1% from 4.2% even though the participation rate increased to 65.7 from 65.6 last month. The underemployment rate also fell to 7.9% from 8.3%

What continues to be head scratching is the average hourly earnings.  It came in unchanged on the month versus expectations of +0.2%. The year on year fell to 2.4% vs. 2.7% estimate.  

How can job growth remains so strong, and company earnings remain so strong, yet neither of those dynamics are flowing through to the workers?  

Of course one answer to that question, is corporations are using earnings to buyback stocks.  That certainly helps stock values, but workers get the short end of the stick.  

Another reason is the hurt from 2008-09 has given the advantage to corporations.  Workers are still happy to just have a job (that’s my theory).  I am sure there are other thoughts, but lack of earnings gains with unemployment at 4.1% is mystifying. 

The earnings miss, helped to send US treasury yields lower. A week ago the 10 year yield closed near 2.41%. Today, the closing level is 2.328%.  

The US dollar was mixed today rising against the EUR, CHF, and AUD (which was sold on lower retail sales in the Asian session), and falling against the GBP and CAD.  It was unchanged vs. the JPY.

The other US data  was pretty good:

  • ISM  non-manufacturing composite index came in at 60.1 versus 58.5 estimate. That was above the 59.8 last month and was the highest level since August 2005
  • Factory orders  rose 1.4%  versus 1.2% estimate.  

In Canada,their employment statistics showed In a change in employment of 35.3K versus 15.0K estimate.  The mix was favorable with full-time employment rising by 88.7K and part-time employment falling by -53.4K.  The unemployment rates ticked up to 6.3% from 6.2%. The participation rate rose to 65.7 from 65.6.  Not bad employment numbers from Canada and it did stall the declines that took the USDCAD toward the 50% of the move down from the May high at 1.29268. The high this week hit 1.2910 and closed today at 1.2763.  

Key technical thoughts into the weekend:

The EURUSD is closing below the 200 week MA at 1.1669 (at 1.1608) and survived have a failure after the break of head and shoulder neck line. That is the bearish news. The not so bearish news is the is the market had a major break last week, and could not take out the lows.  So next week, will be a key week for the pair – one way or the other. Stay below 200 week MA is more bearish. Move above and then above the 100 day MA at 1.1705 area, would force shorts to cover. 

The USDJPY has a quadruple top now on the daily chart between 114.39 and 114.49. The May, July, October and now November highs each stalled in that 10 pip range. Today’s high reached 114.42.  Stay below, more bearish. Move above, more bullish.

The GBPUSD was trading near October high levels on Wednesday and then a more dovish BOE sent the pair lower and toward the lows from October at 1.3030. The low today reached 1.3038.  We also fell back below the 100 day MA at 1.30798 and closed below it today, but only by 5 or so pips.  So that 100 day MA will be a key bullish/bearish barometer at the 1.3080 area, and the 1.3030 low from October will be a key level to get below if the bears want to start more downside momentum. 

The AUDUSD is ending the week near the midpoint of the move up from the December 2016 low at 0.7642. The pair moved sharply lower today after weaker retail sales, but could not reach the weeks low at 0.7639, nor the low from last week at 0.7624. Those levels will need to be breached if the selling is to continue. If not, there could be another test of the 200 day MA at the 0.7700 area.  

Better employment gave the CAD a bid today, after sniffing the 50% of the 2017 range earlier in the week at 1.29268 (the high reached 1.2910).   The fall leaves the pair near the middle of the 100 day MA below at 1.2617 and the 50% retracement above at 1.29268 (the price is at 1.2761).  Which way is the wing going to blow?  The trade next week might be to fade the test of either extreme.  

For the USDCHF, the 100 hour MA was broken twice this week (with spikes lower) and both were quickly reversed. The 100 hour MA comes in at 0.9988. The price is closing the week at parity (at 1.0000).  Go below the 100 hour MA, is more bearish.  Stay above and the double top at 1.0035-37 (last weeks high and this weeks highs) will be eyed. 

The NZDUSD tried to recover off the triple bottom at 0.6817 (low from May, October and low this week), and although the rally moved to 0.6950, there was a lot of ups and downs over the last three day’s of the week which suggests buyers are really not all that in love with the pair. What would make it more bearish would be if the 100 and 200 hour MAs could be broken below at 0.6893 and 0.6880 respectively. If not, than the buyer might get more courage to make a run at the 38.2% of the move down from the October 17 high at 0.6935.  A break above that level would be more bullish. 

Wishing all a great weekend. 

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