Mid-Day Report: Dollar Rises as ADP Missed Expectations
Dollar strengthens mildly in early US session after release of worse than expected ADP employment report. While major pairs are generally in range, USD/CHF's break of yesterday's high serves as an early alert that dollar is resuming recent rally against European majors and is favoring some more upside in the greenback. Crude oil pares earlier gain after reaching 67.99 earlier today and should be supportive to the greenback. ADP report showed private job market contracted more than expected by -254k in September. Markets are expectation Non-Farm Payroll to show -187k contract but based on the ADP report, NFP might miss this expectation. Also released from US, Q2 GDP was finalized at -0.7% annualized contraction, much better than expectation of -1.2%.
Quick update: (Chicago PMI came in much weaker than expected at 46.1, promts some selling in stocks)
Elsewhere, ECB surprised the markets by allotting only EUR 75.2b in today's 12 month long-term refinancing operation. The amount was much lower than markets' expectation of around EUR 100 to 200bn. That raises some speculations that ECB is starting to pave the way for exiting non-standard monetary policies that would possibly hike next summer. Data released from Europe saw flash CPI dropped more than expected by -0.3% yoy in September. Nevertheless, Germany job report showed unexpected -12k drop in unemployment while unemployment rate also dropped from 8.3% to 8.2% in September. Swiss KOF leading indicator beat expectation by rising to 0.85 in September.
Sterling is firm today, lifted by stronger than expected consumer confidence data. Gfk consumer confidence rose sharply from -25 to -16 in September. EUR/GBP dropped sharply today to as low as 0.9076 but is drawing support from 55 days EMA at 0.9081.
Japan manufacturing PMI rose from 53.6 to 54.5 in September. Industrial productions rose 1.8% mom dropped -18.7% yoy in August. Housing starts dropped more than expected by -38.3% yoy in August. Australia retail sales rose much more than expected by 0.9% mom in August while leading indicators rose 0.7%.
Looking at the dollar index, the pull back from 77.33 argues that an intraday top is in place and some consolidations might be seen. Nevertheless, we're still favoring the case that the index has bottomed out at 75.83 already, after drawing support from 75.89. Above 77.33 will bring rally resumption to 78.93. Break there will confirm there whole rise five wave decline from 89.62 has completed and will bring rally to challenge 81 level next.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 1.0313; (P) 1.0359; (R1) 1.0406; More
USD/CHF's rally resumes after brief retreat which was contained above mentioned 1.0278 minor support. As discussed before, a short term bottom should be formed at 1.0185 with bullish convergence conditions in 4 hours MACD. Rebound from there should extend to 1.0530 support turned resistance first. On the downside, below 1.0282 support will dampen this view and turn focus back to 1.0185 low.
In the bigger picture, whole set of price actions from 1.2296 are treated as correction to the medium term rally from 2008 low of 0.9634. Fall from 1.1963 is the third wave of such correction and might have completed it's own five wave sequence (1.1158, 1.1740, 1.0590, 1.0883, 1.0185) after missing 61.8% projection of 1.1740 to 1.0590 from 1.0883 at 1.0172. Break of 1.0530 resistance will affirm this case while further break of 1.1021 resistance will confirm.
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Economic Indicators Update
|23:01||GBP||GfK Consumer Confidence Sep||-16||-24||-25|
|23:15||JPY||Manufacturing PMI Sep||54.5||--||53.6|
|23:50||JPY||Industrial Production M/M Aug P||1.80%||1.90%||1.90%||2.10%|
|23:50||JPY||Industrial Production Y/Y Aug P||-18.70%||-18.80%||-22.70%|
|00:00||AUD||Conference Board Leading Index Jul||0.70%||--||0.90%||0.60%|
|01:30||AUD||Retail Sales M/M Aug||0.90%||0.50%||-1.00%||-0.90%|
|02:00||NZD||NBNZ Business Confidence Sep||49.1||--||34.2|
|05:00||JPY||Housing Starts Y/Y Aug||-38.30%||-31.70%||-32.10%|
|07:55||EUR||German Unemployment Change Sep||-12K||19K||-1K||-5K|
|07:55||EUR||German Unemployment Rate Sep||8.20%||8.40%||8.30%|
|08:30||GBP||Index of Services (3M/3M) Jul||-0.20%||-0.50%||-0.60%|
|09:00||EUR||Eurozone CPI Estimate Y/Y Sep||-0.30%||-0.20%||-0.20%|
|09:30||CHF||KOF Swiss Leading Indicator Sep||0.85||0.33||-0.04|
|12:15||USD||ADP Employment Change Sep||-254K||-195K||-298K||-277K|
|12:30||CAD||GDP M/M Jul||0.00%||0.50%||0.10%|
|12:30||CAD||Industrial Product Price M/M Aug||0.50%||0.50%||-0.50%||-0.60%|
|12:30||CAD||Raw Materials Price Index M/M Aug||3.90%||3.00%||-3.80%||-3.90%|
|12:30||USD||GDP (Annualized) Q2 F||-0.70%||-1.20%||-1.00%|
|12:30||USD||GDP Price Index Q2 F||0.00%||0.00%||0.00%|
|12:30||USD||Core PCE Q/Q Q2 F||2.00%||2.00%||2.00%|
|13:45||USD||Chicago PMI Sep||46.1||52||50|
|14:30||USD||Crude Oil Inventories||0.5M||2.8M|