As the markets await release of the November US Non Farm Payroll report, the USD remained firm against the major currencies in trading overnight. Market expectation for this number is 90,000 after an October number of 171,000.
There is concern as well that the October number could be revised downward. Prior economic releases that act as an indicator for the Non Farm number indicate December NFP will be lower.
As an example, the ADP employment growth number fell to 118,000 in November, from a prior month’s 157,000 and the four week moving average of initial claims rose from 355,000 to 408,000. The unemployment rate is expected to remain at 7.9%.
See how to trade the Non-Farm Payrolls with EUR/USD.
Employment data will also be released for Canada and that number is expected to show an increase of 10,000 for November, with unemployment remaining unchanged at 7.4%.
Turning to the currencies, the EUR continues to be under pressure that pretty much began after the ECB news conference yesterday. The single currency broke through support at 1.2940 overnight to test the next level at 1.2915, but has since rebounded a bit and is trading just below 1.2940 as I write this (5:25 am). While the ECB left rates unchanged, at his press conference, ECB President Draghi downgraded economic forecasts for the Eurozone which prompted traders selling EUR. Add to that a rumor that there was discussion during the meeting about a negative deposit rate and the selling rout was on. Most observers expect the ECB to cut rates by 25 bps during the first quarter of 2013.
Adding to the EUR’s woes was a report from the German Bundesbank that showed it si lowering its forecast for economic expansion in Germany for 2013. Germany had been the one country that seemed to be holding the Eurozone together and contraction of that economy will not bode well. The Bundesbank cut their growth projection to 0.4% for 2013, much lower than the 1.6% that had been predicted in June.
In other currency news, the USD/JPY is trading in the middle of its overnight range after reports that a large earthquake hit near Tokyo setting off Tsunami warnings in the area. As for the election on December 16, LDP leader Shinzo Abe continues to lead in the polls. His victory would certainly lead to further monetary easing in Japan.
Despite the USD strength against most currencies, the Canadian and Australian Dollars remain well supported against the US. Both commodity currencies are close to their weekly highs.
With all eyes focused on Washington D.C. and the 8:30 NFP release, I would not expect much movement ahead of that announcement. Looks like the pressure will remain on the EUR. The interesting action comes after the release.
What factors do traders react to? Poorer economic projections out of Europe, or shaky employment data from the US?
