Mid-Day Report: Mixed Reactions to Non-Farm Payrolls, Unemployment Rate at 26 Year High

Non-farm payroll report showed -216k contraction in the US job markets in August, better than expectation of -225k. However, considering downward revision in July's number from -247k to 276k, the total of payroll contraction in the past two months was -492k, which was worse than the total of August's expectation of -225k plus initial estimate of -247k in July at -472k. Also, unemployment rate rose more than expected to 26 year high of 9.7% versus consensus of 9.5%. Dollar remains in range against European majors after the release but weakens sharply against commodity currencies. Yen crosses dip mildly but rebound strongly following rebound in treasury yield. Nevertheless, there isn't follow through momentum that pushes markets through near term levels yet.

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Canadian dollar spikes higher after the release of better than expected employment report. Contrast to expectation of -20k contraction, the job market in Canada expanded for the first time in four months by 27.1k in August. Unemployment rate also rose less than expected to 8.7% even though it's still the highest number since 1998. Loonie has been steadily under performing other commodity currencies since late July despite some interim volatility. AUD/CAD pulls back after making a new near term high at 0.9275 earlier this week. Today's rebound in CAD argues that some more consolidation might be seen in the cross but after all, there is no change in the trend. Hence, we'd expect CAD to continue to under perform other commodity currencies in near term.

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Released earlier today, Japan capital spending dropped -21.7% in Q2. Swiss CPI rose 0.1% mom, dropped -0.8% yoy in August.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.0568; (P) 1.0601; (R1) 1.0658; More

USD/CHF recovers mildly in early US session but after all it's still bounded in range of 1.0530. Intraday bias remains neutral at this point. As long as 1.0714 resistance holds, the pair is still vulnerable to another fall. Below 1.0530 will target lower trendline support at 1.0408. Nevertheless, strong support should be seen there to bring rebound. On the upside, break of 1.0714 resistance will indicate that fall from 1.0883 has completed already and will flip bias back to the upside. In such case, further rise should be seen to upper trend line resistance (now at 1.0845).

In the bigger picture, there is no change in the outlook of USD/CHF. Firstly, the fall from 1.1963 should be in form of a five wave sequence where current decline from 1.1201 is the fifth wave. Secondly, fall from 1.1963 is treated as the third leg of the consolidation pattern that started at 1.2296. At this moment, another fall cannot be ruled out. But after all, strong support should be seen around 1.0366 key level and bring strong rebound to conclude both the fall from 1.1963 as well as the consolidation from 1.2296. On the upside, break of 1.0883 resistance will be the an important signal that USD/CHF has reversed and further break of 1.1021 resistance will confirm.

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Economic Indicators Update

GMTCcyEventsActualConsensusPreviousRevised
23:50JPYCapital Spending Q2-21.70%-22.90%-25.30% 
07:15CHFCPI M/M Aug0.10%0.20%-0.70% 
07:15CHFCPI Y/Y Aug-0.80%-0.70%-1.20% 
11:00CADNet Change in Employment Aug27.1K-20.0K-44.5K 
11:00CADUnemployment Rate Aug8.70%8.80%8.60% 
12:30USDNon-Farm Payrolls Aug-216K-225K-247K-276K
12:30USDUnemployment Rate Aug9.70%9.50%9.40% 
14:00CADIvey PMI Aug 5451.8 
  G20 Meeting in London ----