Forex signals US short session, December 6 – USD reverses on better job numbers, CAD falls to softer
Risk assets rose slightly early in the morning, after China said it would consider waiving tariffs on some U.S. agricultural products, although it comes with an indirect warning. This was added to yesterday’s comments by Donald Trump that talks with China are going well, as well as Bloomberg’s report that the first-phase agreement will be official from December 15th. China has promised to abolish some U.S. tariffs, but markets today were worried about the U.S. employment report, so traders were cautious as we approached exit time.
The U.S. employment report was much better than expected, with non-payrolls significantly higher than expected for October, and the previous month was also revised at a higher level. The unemployment rate was lower, but earnings slightly exceeded expectations. But the number of earnings for October was revised higher, which more than made up for the failure in the November issue. GOLD made a big bearish turnaround after that report.
The report on employment from Canada was much worse than expected, the unemployment rate jumped 4 points to 5.9%, and employment fell by a whopping 71 thousand, which was contrary to expectations of increased employment. Had the participation rate remained the same, unemployment would have moved to 6.0%. OPEC +, on the other hand, has decided to reduce oil production by 50,000 barrels a day, but crude oil does not appear to be impressed.
- China retaliates after Xinjiang law – The U.S. Senate passed a law on human rights over political prisoners in Xinjiang earlier this week. Today, Chinese state media reported, citing the Foreign Ministry, saying China says it is taking countermeasures against U.S. sanctions on Chinese officials. China has notified the U.S. embassy of countermeasures, but is urging the U.S. to lift sanctions on Chinese officials.
- German Industrial Production – German industrial production has long been capricious, but has relied more on the downside. In the last four months, industrial production has fallen three times. It was expected to become positive in October and increase by 0.1%, after declining by 0.6% in September. But it remained negative, recording a big drop of 1.7% for October.
- Brexit Commentary – Labor leader Jeremy Corbyn said early today that British Prime Minister Boris Johnson was deceiving voters in Brexit. Corbyn claims to have “cold and solid evidence” showing the impact of the Brexit agreement on large parts of the country and in particular the “Northern Ireland issue”, citing a confidential government report. Later, British Prime Minister Johnson replied that Corbyn’s document was “complete nonsense”. There will be no check between Northern Ireland and Britain. I haven’t seen the document presented by Labor, but it’s ‘complete nonsense’. Meanwhile, the Ipsos poll for the UK elections showed that conservatives are 44% (unchanged), Labor 32% (+4).
- OPEC + will further reduce production – OPEC + countries are meeting in Vienna to discuss oil production and prices. In recent weeks, we have heard comments suggesting that the cartel will further reduce oil production, especially from Saudi Arabia, but we have also heard conflicting comments from other OPEC + countries, most notably Russia. Earlier in the day, Saudi Oil Minister Prince Salman Bin Abdulaziz made several comments as follows:
- The market will have to trust us
- OPEC is trying to show analysts that we are doing our job
- The world economy will continue to be well supplied
- But further commitment will allow us all to benefit
- OPEC + wants to prove that it will abide by the agreement
We later heard rumors that OPEC + ministers had agreed to an agreement that would further curb production by 50,000 barrels a day.
- Canadian Employment Report – The Canada Employment Report was released earlier today. The unemployment rate was expected to remain unchanged at 5.5%, but rose to 5.9%. The net change in employment for November was -71.2 K versus + 10,000 estimated, which means that jobs fell. Change in full-time employment -32.8 thousand compared to an estimate of 15 thousand. Change in part-time employment -38.4 thousand versus + 10 thousand estimated. The hourly wage rate was lower at 4.4% compared to 4.5% of the estimated. The participation rate is also lower at 65.6%, compared to the estimated 65.7%, which means that if it remained unchanged, it would increase to 6%.
- U.S. Employment Report – U.S. Employment Report published. Unemployment fell to 5.5% from an expected 5.6%. The change in non-payrolls (new jobs) rose to 266 thousand, which exceeded estimates of 180 thousand. The change in the private payroll also rose to 254 thousand compared to 178 thousand estimated. Production payrolls reached 54,000 versus 40,000 estimated. The labor force participation rate also fell to 63.2% from 63.3% last month, which seems to be the reason for the decline in the unemployment rate.
- U.S. Earnings Report – Average earnings per hour for November exceeded expectations and stood at 0.2% from an estimated 0.3%, but October was revised to 0.4% from 0.2% earlier. The average hourly wage rose to 3.1% year on year, compared to 3.0% of the estimated.
- Consumer sense of the United States – A report of the US Prelim UoM Consumer Sentiment was released earlier. It was expected to improve slightly to 97.0 points, from 96.8 in November, which was revised higher during the second revision, from 95.7 points. But it went much better, jumping to 99.2 points. Wholesale inventories were + 0.1% versus 0.2% estimates. Wholesale sales decreased by 0.7% compared to -0.1% last month, which was revised by 0.0%. Current conditions increased to 115.2 points compared to 112.8 estimated. Compared to 111.6 last month. Expectations also rose to 88.9 points from 87.5 estimated, up from 87.3 last month. One-year inflation expectations fall to 2.4% from 2.5%, 5-10-year inflation expectations fall to 2.3% from 2.5%.
He trades in sight
Like a bull NZD / USD Again
- The trend has been rising for more than 2 months
- Pulling the lower part is complete
- 50 SMA provides support again
50 SMA scares sellers again today
The NZD / USD made a bullish turnaround in early October, which looked just like another entry more before sellers pushed further below. But the vendors didn’t come back and we haven’t seen them since. We saw a few returns, but customers came back and kept things under control.
The situation has improved towards risky assets as we approach the final stage of the first phase agreement between the US and China. There have been events and comments that have led to this back-and-forth deal, such as Donald Trump’s comments yesterday that he could delay the deal until the Chinese election is over, responding to China’s targeted retaliatory targeting of Trump’s electorate.
But today we heard from Bloomberg that the contract could be signed on December 15, despite fierce rhetoric that calmed the nerves. Donald Trump also helped the feeling when he said a moment ago that negotiations with China were going very well.
The NZD / USD retreated lower during the Asian session, but the 50 SMA (yellow) provided solid support on the H1 scale. The price declined from that moving average as the feeling improved after Trump’s comments at the NATO summit. So this pair is pretty bullish and we will try to open the buy signal on another pull lower, at 50 SMA.
Feelings have been quite negative in the last two days, but have improved in the last few sessions following positive comments from Trump and China on trade, despite geopolitical issues. Although the positive numbers from the US improved the feeling in the afternoon.