Dollar Strikes Back on Solid Job Data, With Strong Wage Growth

Dollar rebounds notably after a set of solid non-farm payroll data, with strong wage growth. US stock futures take a dive in response to the news, while treasury yields recover. Australian Dollar appears to be responding most negatively for now, as pressured by risk-off sentiment too. But Euro and Sterling are not far away. Yen also retreats but stays relatively steady except versus Dollar.

Technically, for Dollar to confirm short term bottoming, some levels need to be taken out, including 1.0289 support in EUR/USD, 1.1898 support in GBP/USD, 137.66 resistance in USD/JPY and 0.9597 resistance in USD/CHF. Let’s see if the greenback could extend today’s rebound and give these levels a test.

In Europe, at the time of writing, FTSE is down -0.56%. DAX is down -0.55%. CAC is down -0.71%. Germany 10-year yield is up 0.016 at 1.831. Earlier in Asia, Nikkei dropped -1.59%. Hong Kong HSI dropped -0.33%. China Shanghai SSE dropped -0.29%. Singapore Strait Times dropped -1.02%. Japan 10-year JGB yield rose 0.0003 to 0.252.

US non-farm payroll grew 263k, strong wage growth

US non-farm payroll employment grew 263k in November, above expectation of 200k. Average job growth was 282k over the prior three months, and 392k thus far in 2022. Unemployment rate was unchanged at 3.7%, matched expectations. Participation rate dropped -0.1% to 62.1%. Wage growth was strong with average hourly earnings up 0.6% mom, versus expectation of 0.3% mom.

Canada employment grew 10.1k, unemployment rate dropped to 5.1%

Canada employment grew 10.1k in November, slightly below expectation of 10.5k. Unemployment rate dropped from 5.2% to 5.1%, below expectation of 5.3%. Participation rate dropped -0.1% to 64.8%. Average hourly wages was up 5.6% yoy, staying above 5% level for the sixth consecutive month.

Eurozone PPI at -2.9% mom, 30.8% yoy in Oct

Eurozone PPI came in at -2.9% mom, 30.8% yoy in October, versus expectation of -2.0% mom, 31.5% yoy. Industrial producer prices decreased by -6.9% in the energy sector, while prices increased by 0.2% for intermediate goods, by 0.3% for capital goods, by 0.5% for durable consumer goods and by 1.1% for non-durable consumer goods. Prices in total industry excluding energy increased by 0.5%.

EU PPI came in at -2.5% mom, 31.2% yoy. The largest monthly decreases in industrial producer prices were recorded in Ireland (-32.5%), Bulgaria (-8.8%) and Denmark (-5.5%), while the highest increases were observed in Greece (+9.6%), Hungary (+6.2%) and Belgium (+2.8%).

BoJ Tamura called for review of monetary framework

BoJ board member Naoki Tamura told Asahi daily that a review of monetary framework should be conducted by the central bank. Such review could come “soon or at a somewhat later date”. “Whether the BOJ needs to tweak its monetary policy will depend on the outcome of the review,” he said.

Tamura also noted there was scope to review the feasibility of the 2% target, and consider it as a more flexible goal. “As long as the economy is achieving a virtuous cycle, I think it’s okay even if inflation is at, say 1.8%” instead of 2%,” he noted.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0435; (P) 1.0484; (R1) 1.0575; More…

Intraday bias in EUR/USD is turned neutral first with current retreat. But further rally is still in favor. Above 1.0544 will resume the rise from 0.9543 to 1.0609 fibonacci level. However, firm break of 1.0289 support will confirm short term topping and bring deeper decline back to 1.0092 resistance turned support.

In the bigger picture, a medium term bottom was in place at 0.9534, on bullish convergence condition in daily MACD. Even as a corrective rise, rally from 0.9534 should target 38.2% retracement of 1.2348 (2021 high) to 0.9534 at 1.0609. Sustained trading above 55 week EMA (now at 1.0566) will raise the chance of trend reversal and target 61.8% retracement at 1.1273. This will now remain the favored case as long as 1.0092 resistance turned support holds.

Economic Indicators Update