Earnings reports trumped another black eye to the US employment landscape and risk was once again back on in the NY session. The US dollar was sold off as the robust negative correlation between the buck and stocks was relentless. Equities ended the day more than 1% higher despite initial jobless claims in the US jumping 531K on the week. The market was looking for a more modest 515K and thus the surprise was palpable. This was overshadowed by positive earnings from various financial firms and one very prominent online book retailer. However, earnings overall remain mixed at best.

With about 1/3 of S&P 500 companies having reported 3Q earnings, the picture remains eerily similar to the 2Q results. The bottom-line results (EPS) are coming in 16% above expectations while the top-line sales figures have printed just about in line with conservative forecasts. This suggests businesses continued to drive the bottom line via cost-cutting, mainly on the employment front. We didn't get that net -768,000 job loss in the quarter by accident.

With the consumer seemingly in deleveraging mode (as per recent trends in consumer credit data) and the unemployment rate likely to be sticky above 10% into the new year, driving organic earnings growth will be extremely difficult still. If nothing else, these rather lackluster reports suggest a potential short-term top in the equity space as the price action looks to have overshot reality. Long-term fundamental difficulties notwithstanding, the USD could be poised to carve out a short-term bottom over the next week or so if this pattern on the earnings front continues to play out.

In terms of the price action, EUR/USD initially slipped to a session low by 1.4965 before screaming back towards the 1.5035 area into the close. The pair remains better bid while above 1.50 here and if the equity space continues to push higher overnight, we would think it is only a matter of time before we take out those 1.5050 barriers.  USD/JPY failed to close above the key 91.50/75 area, but we'll be watching this zone again tomorrow. The 38.2% Fibonacci retracement of the most recent 97.78 to 88.01 selloff lurks at 91.74 while the 50-day moving average rests at the 91.51 mark. Daily close above this zone keeps the focus decidedly higher.

It was a wild session for USD/CAD as verbal intervention called the shots again. Bank of Canada Governor Carney said in a speech that intervention was always an option in the currency space and repeated the BOC sentiment that CAD strength will hurt economic growth. The pair shot up from about 1.0460 to 1.0530 within a minute of his comments, before settling back down into the 1.0480/70 area for the day.