Markets are cautiously in range ahead of non-farm payroll report from US today. Economists expect the US job markets to contract by -165k in October, much better than September's -263k. Unemployment rate is expected to climb slightly from 9.8% to 9.9%. The leading indicators to NFP are mixed. Improvements were seen in October ADP but the -203k figure fell short of expectation of -187k. Strong improvement was seen in the employment component of ISM manufacturing index rose remarkably to 53.1 in October, first expansionary reading since August 2008. But the employment component of ISM non-manufacturing index unexpectedly dropped to 41.1. After all, improvements in the job numbers are still expected to be seen in today's NFP. The bigger uncertainty is possibly in the unemployment rate and disappointment there might drive wild reactions in the financial markets. Other data featured today include Swiss unemployment rate, UK PPI, German factory orders, Canadian employment report and US wholesale inventories.
In the quarterly monetary policy statement, RBA raised projections for other inflation and economic growth. GDP is projected to rise 1.75% this year and 3.25 % in 2010 versus prior projection of 0.5% this year and 2.25% in 2010. Inflation is expected to bottom out at 2.25% by end of 2010, compared with prior forecast of 2.0%, and then stay in the target range of 2-3% through June 2012. The statement maintains recent hawkish tone from RBA and said that the cash rate remains at a low level and a further gradual lessening of monetary stimulus is likely to be required over time. Aussie has been strong against New Zealand dollar recently. It's possible that sideway consolidation from 1.2928 in AUD/NZD has completed at 1.1925 already and we're looking at a test of 1.2928/66 resistance in near term.
Looking at the dollar index, intraday bias remains mildly on the downside with 75.98 minor resistance intact and further fall cannot be ruled out. Nevertheless, note that we'd still prefer the case that dollar index has bottomed out at 74.94 already. Downside of the current pull back should be contained well above 74.94 low. Above 75.98 will flip intraday bias back to the upside first.
AUD/USD Daily Outlook
Daily Pivots: (S1) 0.9041; (P) 0.9083; (R1) 0.9141; More
Intraday bias in AUD/USD remains neutral for the moment and recovery from 0.8915 might extend further. But after all, note that with 0.9180 resistance intact, fall from 0.9326 is still expected to continue. Below 0.9022 minor support will flip intraday bias back to the downside first. Further break of 0.8915 will bring fall resumption to 0.8567 support next. However, decisive break of 0.9180 resistance will suggest that fall from 0.9326 has completed and will turn focus back to this high.
In the bigger picture, considering bearish divergence conditions in daily MACD, medium term rise from 0.6284 might have topped out at 0.9326 already. Focus now turns to channel support (now at 0.8952). Sustained break there will confirm this case. In such case, deeper pull back should be seen to 0.8154 cluster support (38.2% retracement of 0.6284 to 0.9326 at 0.8164). Nevertheless, downside should be contained above 0.7702 support and bring rebound. On the upside, above 0.9326 will invalidate this view and indicate that medium term rally is still in progress for 0.9849 high.
Economic Indicators Update
|0:30||AUD||RBA Quarterly Monetary Policy Statement||--||--|
|5:00||JPY||Leading Index Sep P||86.40%||86.40%||83.30%||83.20%|
|6:45||CHF||Unemployment Rate Oct||4.10%||4.20%||4.10%|
|9:30||GBP||PPI Input M/M Oct||1.60%||-0.50%|
|9:30||GBP||PPI Input Y/Y Oct||-1.30%||-6.50%|
|9:30||GBP||PPI Output M/M Oct||0.40%||0.50%|
|9:30||GBP||PPI Output Y/Y Oct||1.70%||0.40%|
|9:30||GBP||PPI Output Core Y/Y Oct||2.00%||1.40%|
|11:00||EUR||German Factory Orders M/M Sep||0.80%||1.40%|
|11:00||EUR||German Factory Orders Y/Y Sep||-13.90%||-20.40%|
|12:00||CAD||Net Change in Employment Oct||10.3K||30.6K|
|12:00||CAD||Unemployment Rate Oct||8.40%||8.40%|
|13:30||USD||Change in Non-Farm Payrolls Oct||-165K||-263K|
|13:30||USD||Unemployment Rate Oct||9.90%||9.80%|
|15:00||USD||Wholesale Inventories Sep||-1.00%||-1.30%|