European Open: USD/CAD Holds Steady Ahead of NFP and CA Employment
Matt Simpson November 5, 2021 6:07 AM
It may be debatable as to how much of an impact NFP will have on markets, given it follows the FOMC meeting. But it places USD/CAD into focus alongside Canada’s employment report.
- Australia's ASX 200 index rose by 28.9 points (0.39%) and currently trades at 7,456.90
- Japan's Nikkei 225 index has fallen by -215.16 points (-0.72%) and currently trades at 29,581.33
- Hong Kong's Hang Seng index has fallen by -239.31 points (-0.95%) and currently trades at 24,985.88
- China's A50 Index has risen by 59.56 points (0.38%) and currently trades at 15,684.17
UK and Europe:
- UK's FTSE 100 futures are currently down -8.5 points (-0.12%), the cash market is currently estimated to open at 7,271.41
- Euro STOXX 50 futures are currently up 4.5 points (0.1%), the cash market is currently estimated to open at 4,337.84
- Germany's DAX futures are currently down -4 points (-0.02%), the cash market is currently estimated to open at 16,025.65
- DJI futures are currently down -33.35 points (-0.09%)
- S&P 500 futures are currently up 8.75 points (0.05%)
- Nasdaq 100 futures are currently up 0.25 points (0.01%)
China’s property shares were under pressure after homebuilder Kaisa Group Holdings had shares suspended after missing a bond payment. The Hang Seng was one of the weaker performers, falling around -1% with the Hang Seng property sub index falling -2%.
The FTSE 100 was propelled higher thanks to a much weaker pound, following the BOE’s decision to hold rates at 0.1%. The index seems quite happy using the 10-day eMA as support so our daily bias remains bullish, although we’d want to see a weaker pound to complement it. And as it is Friday we are not looking for any oversized moves leading into the weekend without an obvious catalyst.
The DAX opened at a record high although failed to hold onto initial gains to close effectively flat relative to the open. Given its upside gap at the record high then it plausible prices may try to fill that gap, as which point traders will want to see if the gap provides support for its next leg higher, or prices reverse for a slight pullback.
Beazley PLC (BEZG) release earnings before market open at 07:00, and Hochschild (HOCM) have their shareholders meeting at 10:00. International Consolidated Airlines (ICAG) also release Q3 earnings today with no time specified.
FTSE 350: Market Internals
FTSE 350: 4179.07 (0.43%) 04 November 2021
- 273 (77.78%) stocks advanced and 68 (19.37%) declined
- 52 stocks rose to a new 52-week high, 2 fell to new lows
- 62.96% of stocks closed above their 200-day average
- 91.17% of stocks closed above their 50-day average
- 25.36% of stocks closed above their 20-day average
- + 11.01%-BT Group PLC(BT.L)
- + 8.84%-Currys PLC(CURY.L)
- + 8.78%-IMI PLC(IMI.L)
- -9.12%-Virgin Money UK PLC(VMUK.L)
- -7.23%-Hargreaves Lansdown PLC(HRGV.L)
- -6.39%-Ashmore Group PLC(ASHM.L)
Forex:Nonfarm payroll is scheduled for 12:30 GMT today but, although we’d likely need to see a strong divergence from expectations for any meaningful impact given it is just 2 days after the Fed announced tapering. Hat said, 455k jobs are forecast to have been filled which is up from 194k, so that leaves plenty of room for disappointment and a weaker dollar should it miss. Unemployment meanwhile is expected to drop to 4.7% from 4.8.
However, what may spice it up is Canadian employment being released alongside NFP, with Ivey PMI released at 14:00. Canada posted a strong employment report in September with unemployment hitting an 18-month low. However, as employed persons remains lower than pre-pandemic levels due to subsequent population growth, we’d likely need to see strong participation and full-time employment growth to bring forwards BOC’s rate hike expectations. But, even then, BOC have just fully tapered their asset purchases and hinted they could hike in the “middle quarters” of 2022, forward from the “second Half” of 2022 at their last meeting.
USD/CAD rose to a 3-week high following this week’s FOMC and OPEC meetings. Lower oil helped push it notably higher yesterday, although the monthly pivot and 50-day eMA are capping as resistance just below the 1.2500 handle, which may make upside potential limited on this timeframe.
Yet the hourly chart shows a strong rise to the monthly pivot and prices are now oscillating around yesterday’s highs. Should prices break above 1.1473 it leaves around 27 pips of upside potential over the near-term. Should weak Canadian data be coupled with weaker oil prices, perhaps it could break above here.
However, given the overhead resistance on the daily chart perhaps the more volatile reaction could be from an NFP miss and higher oil prices. A break beneath the 1.2445 swing low also breaks the weekly R1 pivot and suggests a countertrend move is underway.
Commodities: $1800 in view for gold bugs
24-hours later and WTI is still deciding which side of $80 it wants to be on, despite its volatile day. So it remains a pivotal level for today’s session but it may remain to be a tricky market to trade (and potentially lack direction) as this can usually be the case after such a volatile day. Still, if it can break beneath yesterday’s low then it brings the October high of 76.90 into focus, whilst a break above 80.0 likely brings 81.0 into view, right where the monthly pivot resides.
Gold is trading just above its 200-day eMA and around yesterday’s bullish engulfing high. The question today is whether it can break above 1800, a level it failed to quite test yesterday. And a weaker US dollar (from a soft NFP report) could help with this should that materialise.
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