• The dollar fell against most major currencies on Wednesday. ADP forecast a larger-than-consensus 298K decline in US private payrolls for August. US factory orders, although rising less than expected in July, posted a fourth consecutive gain. Meanwhile, US unit labor costs posted their biggest decline since 2000 and nonfarm labor productivity climbed the most since 2003. US stocks stabilized; the indexes hardly moved ahead of Friday's unemployment report. The S&P 500 declined 3.29 points to 994.76 in light pre Labor Day Holiday trading. The yen rose to a 7-week high, supported by indication from Japan's new government that it does not worry about an appreciating yen. Sterling recovered most of yesterday's losses on less anxiety over banks and the improving UK construction PMI. The Australian dollar was supported by a strong GDP report, which indicated that Australia has avoided a technical recession. The Canadian dollar was little changed against the dollar, pressured by political uncertainty in Canada.
  • The EUR/USD rose after finding support from the long-term uptrend. There was little reaction to a report that the eurozone PPI fell at a record annual pace as the European Central Bank is expected to keep the key interest rate at 1.00% tomorrow. There are resistance in the 1.44-1.45 area, support from the long-term uptrend in the 1.42-area and strong support in the 1.40 area. The pair tested the long-term uptrend again today. If this trend support is broken, the EUR/USD will fall significantly.


Financial and Economic News and Comments

US & Canada

  • US private-sector payrolls declined 298,000 in August, according to estimates by ADP Employer Services. July data was revised to show a decline of 360,000, down from a previous estimate of 371,000. Friday's official employment report released by the Labor Department may show overall job losses approximately 223,000 with the unemployment rate rising to 9.5%.


  • US factory orders increased a less-than-expected 1.3% m/m to $355.5 billion in July, a fourth straight gain, after an upwardly revised 0.9% m/m advance in June, data from the Commerce Department showed. Excluding transportation, factory orders declined 0.7% m/m after June's upwardly revised 2.7% m/m gain. July factory orders dropped 21.8% y/y.


  • US nonfarm productivity was up at a 6.6% q/q annualized rate in Q2 2009, the most since Q3 2003 and slightly higher than a previously reported 6.4% q/q, according to data from the Labor Department. Nonfarm productivity rose 1.9% y/y. Unit labor costs fell at a 5.9% q/q annualized rate in Q2, their largest drop since 2000, and declined 1.2% y/y.
  • Federal Reserve officials in their August meeting expressed concern about the pace of a likely economic recovery. Most participants saw the economy as likely to recover only slowly during the second half of this year, and all saw it as still vulnerable to adverse shocks, the Fed said in minutes released today. Labor market conditions remained of particular concern to meeting participants. We believe the FOMC is underestimating the probability of a strong recovery. Unemployment always lags the overall economy, and growth is likely to be stronger than the Fed expects.


  • Eurozone GDP declined 0.1% q/q in Q2 2009 after a record 2.5% q/q contraction in Q1, Eurostat reported, confirming flash estimates published on August 13. Household consumption expenditure rose 0.2% q/q in Q2, the first rise in more than a year, after a 0.5% q/q decline in Q1. Exports fell at a slower rate, falling 1.1% q/q, following Q1's 8.8% q/q drop. Government spending increased 0.4% q/q after rising 0.7% q/q. Investments declined 1.3% q/q after falling 5.3% q/q. The economy contracted 4.7% y/y in Q2 after shrinking 4.9% y/y in Q1.
  • Eurozone producer prices declined a slightly more-than-expected 0.8% m/m in July after an upwardly revised 0.4% m/m increase June, PPI data from Eurostat showed. July PPI fell 8.5% y/y, the largest fall since records began in January 1981, following June's revised 6.5% y/y slide.
  • The CIPS/Markit UK construction PMI increased less than expected to 47.7 in August from 47.0 in July, indicating the UK construction sector contracted at the slowest pace in 18 months, according to data from Markit Economics and the Chartered Institute of Purchasing and Supply.


  • Australia's Q2 2009 GDP grew 0.6% q/q, the largest expansion in more than a year, after a 0.4% q/q increase in Q1, according to data from the Australian Bureau of Statistics. Consumer spending rose 0.8% q/q in Q2, the biggest gain since Q4 2007, adding 0.5 percentage points to GDP. The economy expanded 0.6% y/y in Q2.


  • Japan's monetary base rose 6.1% y/y in August, a twelfth consecutive year-on-year gain, after rising at the same rate in July, the Bank of Japan reported.

FX Strategy Update

Primary TrendPositiveNegativePositiveNegativeNegativePositiveNeutral
Secondary TrendNeutralNeutralNeutralNeutralNeutralNeutralNeutral
Start Position1.4142N/AN/AN/AN/A0.6601N/A