Eyes Trained on US Jobs Report

Daily Analysis - 04/09/2015

August Payroll Data Due for Release Later Final Jobs Report Ahead of Next Federal Reserve Meeting

The all-important payrolls data for August is due today as market participants gear up for the final and important jobs report that could swing the Fed’s decision in its bid to hike rates at its September FOMC meeting. With inflation subdued, the Fed’s FOMC members have been banking on the labour market to post strong gains in hopes that the rise in wages and employment could trigger a pickup in inflation.

Nonfarm Payrolls Forecasting Unemployment Rate Drop

Expect to see a lot of volatility today across the currency, treasury and equity markets today as the Bureau of Labour Statistics releases the monthly jobs numbers for August. Heading into the event, it is a mixed bag as seasonality points to a weak print on the jobs numbers with upward revisions the following months. While the median forecasts are for the US unemployment rate to have declined to 5.20%, the markets are quite divided on this as some expect the unemployment rate to remain unchanged. Given that the August jobs report remains the final piece to the puzzle, the markets will be very closely watching the numbers and could react assymetrically to the actual print. The USDCHF currerncy pair managed to gain modestly yesterday following up after a bullish engulfing candlestick pattern a day before.

Dovish ECB Sends Euro Lower

In its monetary policy meeting yesterday, the European Central Bank refrained from making any major policy decisions and left the ECB's minimum bid rate unchanged at 0.05%. In the follow-up press conference, the ECB staff projections saw inflation and GDP forecasts revised lower on the back of renewed downside risks. Growth for this year was marked down by 0.10% while inflation was also revised down by 0.10%. The only major change to policy came from the ECB's decision to increase the issue share limit to 33% from 25% in an effort to increase the implementation of the ECB's asset purchase program. ECB President, Draghi also noted that the Central Bank could expand its asset purchase program in size and scope and could stretch beyond September 2016 if needed. The dovish comments were widely expected but the Euro continued to decline, losing -0.90% for the day to close at 1.1122.

Upcoming Canadian Jobs Report

Canada will be releasing its monthly jobs number today which will be released at 13:30 GMT. The median forecasts are for the employment change to have declined -4.8k, after a surprising rise to 6.6k last month. On the unemployment rate, the estimates call for an unchanged Canadian unemployment rate at 6.8%. About an hour and a half later, the Canadian Ivey Purchase Managers Index will be released with median consensus looking to see a modest rise to 53.5, up from 52.9 previously. Combined, both these events including the US jobs report released around the same time could bring a lot of volatility to the USDCAD. At the time of writing, the Loonie was trading at 1.3218.

Dow Jones Trades Flat

The Dow Jones Index attempted to post a second day of rally with prices briefly testing the highs above 16500, but the Index failed to hold on to its gains and closed the day with very modest gains. Today's price action is currently predominantly showing a bearish bias due to the lacking momentum higher. A daily close lower could confirm a bearish shooting star candlestick pattern. Considering that this bearish pattern comes near the retracement to the previous declines a week ago, it could potentially signal further downside in the equity markets with the lows below 16000 being the line in the sand.