• The dollar traded mixed ahead of Friday's US employment report. Initial jobless claims posted their fifth consecutive week of decline and remained below the 500K mark for a second week, signaling improving labor market conditions, but the ISM US non-manufacturing index showed US service industries unexpectedly contracted in November after two months of expanding activity. The S&P 500 declined 9.32 to 1,099.92. The overbought yen fell for a third consecutive day. Sterling reversed earlier gains. The Canadian dollar fell and the Australian dollar was little changed.
  • The EUR/USD pared earlier gains, unable to penetrate last week's high. The European Central Bank maintained its key interest rate at 1.00%. ECB President Jean-Claude Trichet announced the first steps in withdrawing the extraordinary liquidity that the ECB has pumped into the banking system, but stressed that the current interest rate is appropriate. The last of 12-month refinancing operations will be this month and the final 6-month operation will be held in March, Trichet said. ECB member Axel Weber said the interest rate is at an appropriate level as he does not see any risk to price stability. The EUR/USD is in a strong uptrend. There are resistance in the 1.5150 area and support in the 1.4800 area. If this support is broken, the technical outlook will turn bearish.


Financial and Economic News and Comments

US & Canada

  • The ISM US non-manufacturing index unexpectedly declined to 48.7 in November from 50.6 the prior month, indicating US service industries contracted after expanding in October and September, data from the Institute for Supply Management showed. Most of the index' key components declined in November. The business activity index fell to 49.6 from 55.2; the new orders index fell to 55.1 from 55.6; and the supplier deliveries index fell to 48.5 from 50.5. The employment index increased to a still contractionary 41.6 from 41.1. Inflation faced by the service industries increased in November, with the prices paid index rising to 57.8 from October's 53.0.


  • US initial jobless claims in the week ending November 28 unexpectedly declined 5,000 to 457,000 from the previous week's downwardly revised 462,000, figures from the Labor Department showed, registering the lowest level since September 6, the second consecutive week that claims were below the 500,000 mark, and the fifth consecutive week of decline. The 4-week moving average of new jobless claims fell 14,250 to 481,250, the lowest level since November 1. Continuing claims in the week ending November 21 rose 28,000 to 5,465,000 from the preceding week's upwardly revised 5,437,000. The 4-week moving average of those continuing claims dropped 75,750 to 5,541,500. The insured unemployment rate for the week ending November 21 was unchanged at 4.1%.


  • US nonfarm productivity increased at an 8.1% annual rate in Q3 2009, the strongest performance in six years, revised downward from an originally estimated 9.5% rise, according to data from the Labor Department. Nonfarm productivity rose 4.0% y/y. Compensation per hour in the nonfarm sector rose at a 5.4% annual rate in Q3 and increased 2.5% y/y. Real compensation advanced at a 1.8% annual rate and rose 4.1% y/y. Unit labor costs fell at a 2.5% annual rate in Q3, revised from an originally estimated 5.2% drop. Unit labor costs declined 1.4% y/y.


  • Eurozone GDP grew 0.4% q/q in Q3 2009, the first quarterly expansion since Q1 2008, after a 0.2% q/q decline in Q2, according to Q3 GDP estimates released today by Eurostat, unrevised from the flash figure published on November 13. The Q3 GDP fell an unrevised 4.1% y/y, easing from Q2's 4.8% y/y contraction. Household consumption expenditure declined 0.2% q/q in Q3 after a revised 0.0% q/q in Q2. Investments slid 0.4% q/q after a revised 1.7% q/q decrease. Government consumption expenditure rose 0.5% q/q after rising a revised 0.6% q/q. Exports grew 2.9% q/q in Q3 after a 1.3% q/q decline in Q2, while imports increased 2.6% q/q following Q2's 2.9% q/q decline.
  • Eurozone retail sales were unchanged m/m in October after a revised 0.5% m/m decline in September, Eurostat reported. October retail sales fell 1.9% y/y, a 17th year-on-year fall, following September's revised 2.8% y/y decrease.


  •  The eurozone services PMI advanced to 53.0 in November, downwardly revised from a previously reported 53.2, from 52.6 in October, according to final November PMI data released by Markit Economics. The composite eurozone PMI increased to an unrevised 53.7 in November from 53.0 the prior month, indicating eurozone services and manufacturing industries expanded at the fastest pace since November 2007.
  • Germany's services PMI increased to 51.4, revised slightly downward from a previously reported 51.5, from 50.7 in October, final November PMI data from Markit Economics showed.
  • The CIPS/Markit UK services PMI unexpectedly declined to 56.6 in November from 56.9 in October, indicating the UK services sector expanded for a seventh consecutive month but at a slightly slower pace, according to data from the Chartered Institute of Purchasing and Supply and Markit Economics.


  •  Japan's capital spending fell a more-than-expected 24.8% y/y in Q3 2009, a 10th consecutive quarter of decline, after a 21.7% y/y slide in Q2, as firms remained hesitant to invest amid Japan's deflation and fragile economic recovery, data from the Ministry of Finance showed. Firms' profits dropped 32.4% y/y in Q3, a ninth consecutive quarter of decline, while sales fell 15.7% y/y, a seventh straight quarter of decline. Manufacturing capital spending plunged a record 40.7% y/y in Q3, deepening a 32.0% y/y fall in Q2. Capital spending excluding software dropped a record 25.7% y/y, following Q2's 22.2% y/y decrease.
  •  Australia's retail sales grew a slightly more-than-expected 0.3% m/m in October to a seasonally adjusted A$19.75 billion ($18.34 billion) after a 0.2% m/m decline in September and a downwardly revised 0.5% m/m increase in August, according to data from the Australian Bureau of Statistics. October retail sales rose 6.0% y/y nsa.


FX Strategy Update

Primary TrendPositiveNegativePositiveNegativeNegativePositiveNeutral
Secondary TrendPositiveNegativeNeutralNegativeNegativePositiveNeutral
Start PositionN/AN/AN/AN/AN/A0.6601N/A