Mid-Day Report: Canadian Dollar Lacks Follow Through Buying after Mixed Employment Data
Canadian dollar spikes higher in early US session after job market report showed more than expected expansion of 35.8k in August. However, we’re not selling much follow through buying yet as the positive picture was dampened by unexpected rise in unemployment rate to 8.1%. Swiss franc is sharply lower across the board. Traders are citing strong risk appetite as the driving force in Franc’s selloff after strong China import data. However, we’re doubtful on such argument as European stocks are broadly flat only. We don’t see any momentum in equities yet. Swiss weakness is possibly not due to intervention neither as the pattern doesn’t look like so. It’s believed that traders are lightening long positions in Swiss franc ahead of next Thursday’s SNB rate decision instead.
Elsewhere, markets are pretty directionless so far. ECB president Trichet said that the unlimited loans to financial institutions are a “transitory” measure only and will be “progressively” phased out. Though, Trichet said that it’s a process that “takes time. Trichet also reiterated that ECB wants a Trichet said the ECB wants a “quantum leap in the reinforcement of fiscal surveillance” of European countries’ budget deficits.
Data from UK saw PPI input moderated deeply to 8.1% yoy in August, with output moderated to 4.7% yoy. The data will keep BoE’s stance dovish on inflation. Japan Q2 GDP was left unrevised at 0.4% qoq. Domestic CGCPI was flat yoy in August, better than expectation of -0.2% yoy.
Daily Pivots: (S1) 1.0294; (P) 1.0344; (R1) 1.0387; More.
Intraday bias in USD/CAD remains on the downside for the moment and further decline is still expected to 1.0246 support. Break will target 1.0106 key support level next. Though, note that USD/CAD is still bounded in choppy sideway trading between 1.0106/0675. We’d expect strong support from around parity to contain downside and bring another rebound. On the upside, above 1.0393 will turn intraday bias neutral again. Note that more choppy consolidations would still be seen before a break of 1.0675 resistance.
In the bigger picture, the failure to take out 1.0675 resistance indicates that consolidations from 1.0851 is still in progress and rebound from 0.9929 is not ready to resume. But in any case, we’d continue to expect strong support from parity to contain downside and finally bring rally resumption. Above 1.0675/0671 resistance zone will target 38.2% retracement of 1.3063 to 0.9929 at 1.1126 at least, with prospect of extending further to 61.8% retracement of 1.1866. However, sustained trading below parity will indicate 0.9929 is not yet the bottom and will turn focus back to this low.
23:50 JPY BoJ Minutes — – 23:50 JPY GDP Q/Q Q2 F 0.40% 0.40% 0.10% 23:50 JPY GDP Deflator Y/Y Q2 F -1.70% -1.80% -1.80% 23:50 JPY Domestic Corporate Goods Price Index Y/Y Aug 0.00% -0.20% -0.10% 8:30 GBP PPI Output M/M Aug 0.00% 0.10% 0.10% 8:30 GBP PPI Output Y/Y Aug 4.70% 4.80% 5.00% 8:30 GBP PPI Output Core M/M Aug 0.00% 0.10% 0.20% 8:30 GBP PPI Output Core Y/Y Aug 4.70% 4.60% 4.70% 8:30 GBP PPI Input M/M Aug -0.50% 0.20% -1.00% 8:30 GBP PPI Input Y/Y Aug 8.10% 9.00% 10.80% 11:00 CAD Net Change in Employment Aug 35.8K 17.8K -9.3K 11:00 CAD Unemployment Rate Aug 8.10% 8.00% 8.00% 14:00 USD Wholesale Inventories Jul 0.40% 0.10%
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