FOREX: US Dollar May Rise Anew On Hints US Jobs Data To Disappoint

By Ilya Spivak, Currency Strategist

Talking Points
  • Australian, New Zealand Dollars Follow Stocks Higher in Overnight Trade
  • US Dollar, Major Currencies Look to US Jobs Report to Shape Outlook
  • Leading Indicator Hints NFP May Miss Expectations, Sinking Risky Assets

The Australian and NewZealand Dollars outperformed in overnight trade as Asian stockexchanges followed Wall Street higher, pulling the sentiment-linked currencies along for the ride. The MSCI Asia Pacificregional equity index added 2 percent, bolstered by news thatthe European Central Bank will resume long-term repo operations (LTROs) to boost liquidity access for Euro Zone bankshobbled by the region’s debt crisis as well as rumors thatthe European Commission is working on a coordinated plan torecapitalize lenders to help deal with losses from a default on theEU periphery.

Looking ahead, a quiet European calendar islikely to see traders looking ahead to the US Employment report due in the afternoon. Consensusforecasts call for the world’s top economy to add 55,000 jobsin September, keeping the unemployment rate at 9.1 percent. While a print in line with expectations wouldmark an improvement after hiring stalled in August, some leadingindicators point to the possibility of a downside surprise. Indeed,the ISM non-manufacturing survey showed service-sector employmentshrank in September. Since an overwhelming majority of US workerswork in service industries (76.8 percent according to estimatespublished by the CIA), that ought to be a good reflection of whathappened economy-wide.

Needless to say, the outcome is critical in setting the direction of risk appetite. At the macro level, the two major headwinds facing sentiment are the EU debt crisis and the slowdown in the global recovery. Naturally, the latter theme is intimately tied to performance in the world’s largest economy. Ben Bernanke made clear in his Congressional testimony earlier in the week that while the Federal Reserve had other tools it could use to bolster growth, it had played its card for the time being and was now in wait-and-see mode to gauge how effective its new policy mix will prove. With that in mind, the outcomes of key US economic data releases are no longer being interpreted in terms of the likelihood of a so-called “QE3”, but rather seen as a more direct reflection of the corporate earnings outlook.

With most major currency pairs showing intimate correlations with the S&P 500 , the outlook on earnings (particularly on theeve of the third-quarter reporting season that kicks off in forcenext week) and its implications for the path of risk appetite willbe of critical importance in shaping trading dynamics in FXmarkets. Put simply, this means that the outcome of the jobs reportis poised to set the tone for trajectory of the safe-haven USDollar against most of its leading counterparts, not just in theseveral hours of trade before the closing bell on Wall Street butover the days and weeks ahead.

Related: Japanese Yen Flat After BoJ Leaves Rates Unchanged

Asia Session : What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

22:30

AUD

AiG Performance of Construction Index (SEP)

30.0

-

32.1

23:50

JPY

Official Reserve Assets ($) (SEP)

1200.6B

-

1218.5B

3:37

JPY

Bank of Japan Rate Decision

0.10%

0.10%

0.10%

5:00

JPY

Coincident Index (AUG P)

107.4

107.4

107.1

5:00

JPY

Leading Index (AUG P)

103.8

103.5

104.6

E uro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

5:45

CHF

Unemployment Rate (SEP)

2.8%

2.8%

Medium

5:45

CHF

Unemployment Rate s.a. (SEP)

3.0%

3.0%

Medium

6:45

EUR

French Central Government Balance (€) (AUG)

-105B

-86.6B

Low

6:45

EUR

French Trade Balance (euros) (AUG)

-5950M

-6460M

Low

8:30

GBP

PPI Input n.s.a. (MoM) (SEP)

1.2%

-1.9%

Low

8:30

GBP

PPI Input n.s.a. (YoY) (SEP)

17.1%

16.2%

Low

8:30

GBP

PPI Output n.s.a. (MoM) (SEP)

0.2%

0.1%

Low

8:30

GBP

PPI Output n.s.a. (YoY) (SEP)

6.2%

6.1%

Medium

8:30

GBP

PPI Output Core n.s.a. (MoM) (SEP)

0.1%

0.2%

Low

8:30

GBP

PPI Output Core n.s.a. (YoY) (SEP)

3.7%

3.6%

Medium

10:00

EUR

German Industrial Production n.s.a. (YoY) (SEP)

6.4%

10.1%

Medium

10:00

EUR

German Industrial Production s.a. (MoM) (SEP)

-2.0%

4.0%

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3303

1.3586

GBPUSD

1.5311

1.5636

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya , e-mail ispivak@dailyfx.com . Follow me on Twitter at @IlyaSpivak

To be added to Ilya 's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2011/10/07/FOREX_US_Dollar_May_Rise_Anew_on_Hints_US_Jobs_Data_to_Disappoint.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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