Friday, November 6, 2015

All eyes on non-farm payrolls

FXStreet (Mumbai) - The pre-NFP calm spread across Asia, with Asian equities posting moderate gains. Among the Asia-Pac currencies, the yen remained bid versus the US dollar, while markets digest the latest comments from BOJ Governor Kuroda as he speaks at a meeting held by the Naigai Josei Chosa Kai (Research Institute of Japan) in Tokyo.

Key headlines in Asia

BOJ's Kuroda: Japan's economic fundamentals remain solid

BoJ's Kuroda: Additional headlines hitting the wires

RBA SoMP: Improved economic conditions, inflation forecast revised down

Fed's Bullard: Guidance about possible Dec rate hike was needed

Dominating themes in Asia - centered on JPY, AUD, NZD

The Reserve Bank of Australia’s (RBA) Statement of Monetary Policy (SoMP) and Bank of Japan (BOJ) Governor Kuroda’s speech were the two main events that made up for a data-empty Asian calendar. While the RBA SoMP turned out mixed and weighed slightly on the Aussie, the latter’s speech had little impact on the USD/JPY pair.

The Aussie remains capped below 0.7150/55 band as markets continue to digest the latest quarterly SoMP, which almost confirmed further easing from RBA, after the central bank downwardly revised CPI and GDP forecasts. While its OZ counterpart, the Kiwi trades modestly flat, holding onto 0.66 barrier.

According to the SoMP, "At the November meeting, the Board judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that it was appropriate to leave the cash rate unchanged. At the same time, the Board recognized that the economy is likely to be operating with a degree of spare capacity for some time yet and noted that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand."

While BOJ Governor Kuroda sounded upbeat on the Japanese economic outlook while acknowledging that slowdown in emerging markets are already affecting Japanese exports. He also reiterated the BOJ 2% price target will be easily met with the current easing policy. USD/JPY continues to trade near the hourly 20-SMA located 121.75, retreating from multi-month highs reached at 122 levels.

The Asian stocks are seen ticking higher on Friday, with markets locking-in gains ahead of the crucial US employment data. Japan’s benchmark, the Nikkei gains +0.58% to 19,228 while mainland China’s benchmark, the Shanghai Composite rises 0.52% to 3,541 while Australia’s S&P ASX index advances 0.25% to 5,206. Hong Kong’s Hang bucked the trend and drops nearly 1% to 22,830.

Heading into Europe & the US

After an eventful European session yesterday, Friday’s EUR calendar also offers a slew of relevant economic updates from the Eurozone and the UK.

Germany will report the results of industrial production in September, with 0.5% growth seen m/m, against the 1.2% decline registered in August, and a 1.1% advance y/y, after 2.3% growth booked in Aug.

The UK industrial production results in September are seen falling 0.1% on a monthly basis after the 1.0% advance reported in August, and adding 1.3% on an annual basis compared to the 1.9% growth reported previously.

Besides, ECB board member Peter Praet is scheduled to speak on monetary policy and data processing while ECB’s Yves Mersch will speak at the Slovenian Banking Day in Ljubljana.

US NFP in Spotlight

The much-awaited event for this week, the non-farm payrolls from the US, will be finally reported in the NY session ahead, with markets expecting 180k jobs additions in Oct against a dismal 142k added in Sept.

Any figure above expectations or even matching
expectations will trigger a fresh USD rally and almost seal in a Dec Fed rate hike deal. Further, attention will be also paid to the average hourly earnings for further cues on the US labor market conditions, which has steadied over the last two years.

Besides, Canadian employment and building permits data will be also published in the NA session.

EUR/USD Technicals

Valeria Bednarik, Chief Analyst at FXStreet noted, “Technically, there has been no much of a change to the dominant bearish trend, given that daily basis, the pair posted a lower low and a lower high. The short term picture has turned neutral according to the 1 hour chart, as the price hovers around a flat 20 SMA, whilst the technical indicators head nowhere around their mid-lines.”

“In the 4 hours chart, the 20 SMA presents a strong bearish slope above the current level, currently around 1.0930, while the technical indicators have corrected the extreme oversold readings reached at the beginning of the day, and remain well below their mid-lines. Nevertheless, the US employment report will set the tone during the last day of the week, regardless technical readings.”
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