Investors Look to the End of Week U.S. Jobs Report

The US dollar recorded combined performance last week.  Consolidative technical stress, after it spurted higher after the previous week with the help of the dovish ECB and rate cuts by the PBOC, and month-end pressures dominated.  There is some disappointment that the BOJ didn’t ease, helping send the actual yen higher before the weekend break. Heightened expectations for an RBA price cut in the week ahead weighed on the Australian dollar. The actual euro itself was practically unchanged on the week as well as off 1.5% on the 30 days. 

The dollar gained against most emerging market currencies even though there were a few notable exceptions.  The rebound in oil prices may have helped the Mexican and Colombian pesos and B razil real to close the week on a firm note (0.5% and 0.7% and 0.5% respectively) to lead the emerging marketplace currencies.  The Chinese yuan also flower about 0.5% last week, assisted by speculation of treatment and reports about raising capital controls in a possible experiment in the Shanghai free-trade zone. 

The dollar'utes technical tone is not particularly strong as the new month starts.  The next big drive in the divergence is not until Dec when the ECB may ease, and also the Fed may tighten.  The late dollar longs might have their conviction tested.  Even a strong jobs report after the week may be unable to restart the dollar's upside impetus.   

The Dollar Index rallied about 4.4% in the second half of October.  It went from the lower end of its recent range to the upper end.  The data that may determine next month's coverage decisions is not available however.  It seems prudent for dollar bulls to take some profits in front of 98.00 in the middle of last week.  Assuming the correction of the advance in the last couple of weeks has begun, the first target is near Ninety six.30, but we believe the 95.70 area is the main objective.

The euro's dip brief below $1.09 seems to denote the end of a technical move.  Key support is at $1.08, but for short-term individuals it is a bridge too far, and also the first sign momentum has slowed after a big move, others get out as well.  Note that at $1.0940 the euro had given back 61.8% of its increases from March through July.  That bounce in the dinar followed a nine-month slide that began from near $1.Forty in Q2 14.  The March-August recovery in the euro fell timid of the 38.2% retracement of the preceding nine-month drop.    

On what appears to be the short-covering bounce, the euro approached the bottom end of the $1.1080-$1.1100 gang of resistance before the weekend.  A move above $1.1125 could signal moving back to $1.1200-25, the latter housing the actual 20-day moving average.  It looks like the actual MACDs and stochastics can turn higher next week.

Since the immediate dollar gains after the ECB and PBOC announcements, the dollar has chopped around a JPY120-JPY121.60 range.  The actual JPY121.85 area marks the 61.8% retracement of the dollar's decline since the August higher.  The current range itself is the upper end of the band that has endured since late August.  Every day ranges did increase a week ago.  The market here too seemed reluctant to challenge the dollar extreme, which extends to JPY122.00 (and corresponds to the 20-week moving average). 

Purchases against the euro helped lift sterling against the dollar ahead of the weekend.  It managed to near above the downtrend line drawn from the actual August 25 high (~$1.5820) and also the September 18 high (~$1.5660).  There is a trend line violation on an intraday basis but not on the closing basis in Oct until the end of the month.  This came in near $1.5410 at the end of a few days.  Below there, support is near $1.5350.  The next upside focus on is in the $1.5510-$1.5525 area, with a split signaling a move toward$1.5600. 

The dollar took out a downtrend line against the Swiss franc prior to the weekend but closed back below it.  The trend collection connects the September Eleven high (~CHF1.1050), the October Thirteen high (~CHF1.0950) and the October Twenty-eight high (~CHF1.0900).  It comes in near CHF1.0885 at the beginning of next week and finishes the week closer to CHF1.0865.  The RSI did not confirm the breakout.  The CHF1.0905 area also corresponds to a 50% retracement of the dollar'utes losses since September Eleven, and the 61.8% retracement is near CHF1.0940. 

The US dollar spent the first half of October easing from the Canadian dollar after documenting 11-year highs at the end of September.  The greenback recovered in the other half of the month before stalling in the middle of last week in the CAD1.3270-CAD1.3280 region.  It tested the CAD1.3255 region before the weekend that matches a 50% retracement of the greenback's gains since the middle of the month.  The actual 61.8% retracement is near CAD1.3000.  A break of that targets CAD1.2940, and then CAD1.2800. 

Softer than expected Q2 inflation information fanned expectations of an RBA rate reduce this week and weighed on the Australian dollar.  With the help of continued credit expansion, the Australian dollar found support near $0.7070 and recovered to almost $0.7150 before the weekend.  Immediate resistance is incorporated in the $0.7185 area.  Assuming overcoming this particular, the initial target is $0.7210-$0.7225.  As the RSI has already turned higher, and the MACDs and Stochastics look poised to turn in the next session or 2. 

Light sweet crude oil looks to move higher in the coming days.  The down draft that required the December contract from about $51.40 a barrel on October 9 to just about $42.60 on October Twenty nine appears complete.  The 50% retracement focus on (~$47.00) happened before the weekend.  The next retracement target is a little above $48.00.  The technical indications are constructive, and the chance of surpassing retracement objectives.  The 100-day shifting average is near $49.60. 

US 10-year Treasury yields rose from 2.00% on October 27 to almost 2.20% before running out of vapor.  This is an important technical area.  It corresponds to the 20- as well as 200-day moving averages. In addition, it is the location of a trend line off the mid-July (~2.46%) and mid-September (~2.30%) highs.  We anticipate a consolidative phase ahead of the employment data, which suggests a downward drift in produces. 

The S&P 500 looks technically vulnerable after posting an outside down day before the weekend. It made a new higher for the move on Friday prior to reversing to close below Thursday's lows.   Given the big run-up, one should respect the price action. Search for lower prices, especially in the first area of the week.  We look for the space created by the sharply higher opening on October Twenty three to drawn prices. That gap is roughly in between 2055.20 and 2058.20. Anticipate additional support near The year 2050.

Dollar may Trade with Heavier Bias Ahead of Employment Data is republished with permission from Marc to Market