Daily FX Trading Update: US Non-Farm Payrolls Due – Dec 5, 2014

Daily FX Trading Update: US Non-Farm Payrolls Due - Dec 5, 2014

The US dollar extended its rallies in recent FX trading, pushing USDJPY to the 120.00 levels. Data from the US economy came in line with expectations, as the initial jobless claims saw a 297K increase. Traders are pricing in expectations ahead of today’s NFP release, which might indicate a faster pace of hiring growth at 231K in November versus 214K in the previous month. This could be enough to keep the jobless rate steady at 5.8% and the dollar rally intact. Weak data, on the other hand, could cast doubts on the Fed’s rate hike expectations and lead to dollar selling.

The euro enjoyed an FX trading relief rally during the ECB press conference, during which Draghi remained vague on future easing. While many expected him to deliver his usual set of dovish remarks and let the markets in on what kind of stimulus measures they plan to implement next, he said that there is a lot of data to look at and that policymakers will have to reassess next year. This was considered less dovish by many, as Draghi didn’t guarantee actual quantitative easing. German factory orders and euro zone revised GDP data are due today.

FX Trading Fundamentals

The pound continued its consolidation to most of its major FX trading counterparts, as the BOE decision barely offered any clues on monetary policy biases. Pound pairs experienced an additional dose of volatility then but stayed stuck at their current levels, as traders would rather wait for the minutes of the meeting to be released before taking any directional plays. Only the consumer inflation expectations are up for release from the UK today and this might not have a strong impact on currency movement.

The franc followed in the euro’s footsteps and rallied after ECB Governor Draghi didn’t commit to further easing. There have been no reports released from Switzerland then while today has foreign currency reserves data due. After the gold initiative referendum, it will be interesting to see whether the SNB has enough to afford an intervention in the currency market in order to keep the franc weak.

The yen resumed its tumble to the dollar but was able to hold steady against some of its FX trading counterparts. There have been no major reports out of Japan yesterday and today has only the leading indicators due. A dip from 105.6% to 104.2% is expected and might lead to a bit of yen weakness if the actual figure disappoints.

The comdolls had a mixed FX trading performance to the dollar, as the Australian dollar crawled lower while the Loonie consolidated. The Kiwi was able to enjoy a strong rebound, despite the lack of data from New Zealand. The Aussie was barely able to benefit from strong retail sales and trade balance figures, as traders were still reeling over the weak GDP reading and talks of a potential RBA rate cut. Canada’s Ivey PMI was stronger than expected at 56.9 versus 52.7, reflecting a strong pickup in manufacturing expansion. For today, the Canadian jobs report might be the big mover for the Loonie pairs, as a weaker pace of hiring growth is expected. Canadian trade balance is also up for release later on.

To contact the reporter of the story: James Brennan at james@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.