Risk appetite was muted in Asian session ahead of the US labor data. European equity markets are broadly lower, following Asia's lukewarm session. Overall, we expect a quiet morning with thin volumes and tight ranges. Oil and gold were 1% lower, while EURUSD consolidated between 1.5040-1.5140 and USDJPY traded between 88.00-88.50. Perhaps the only FX chart of interest would be the USDMXN, which finally broke support at 12.810 putting the next significant level at 12.000. We are seeing leveraged accounts building long USDJPY positions, as rumor swirl over Japanese government potentially selling US treasuries and theories over intervention. While we don’t subscribe to this specific market gossip, we do expect the JPY to continue to depreciate.
The main event of the day is clearly US NFP. Markets are expecting a -125k drop and the unemployment rate to hold steady at 10.2%. We are slightly more optimistic (due to seasonal factors and recent encouraging economic data) and are expecting a figure south of -100k. Recently, it has become very difficult to gauge the markets reaction through the USD. Sometimes the greenback responds negatively to positive news while other times the reverse. Trading specially risk correlated crosses, such as the AUDJPY, hold a more direct cause and effect relationship.
Also of note will be the economic data out of Canada . The unemployment rate is expected to remain unchanged at 8.6% and 15k net change in employment. And in other data, the Ivey PMI is expected to decrease slightly to 60.0. The encouraging news should help the USDCAD focus back on to 1.0345 support.
G10 Advancers and Decliners vs USD