Yesterday’s rebound in US markets after a disappointing start to 2014 was a welcome turnaround ahead of today’s December ADP jobs report and release of the latest FOMC minutes.
There appears to be rising optimism about the prospects for the US economy
after yesterday’s sharp fall in the US trade numbers for November, as well as the prospects for the European economy in spite of rising concerns about a deflationary outlook.
The December ADP employment report
will, it is hoped give investors an early look at the prospects for a good employment report number on Friday. While the correlations between the two numbers sometimes diverge sharply, markets always like to use the ADP number as a weather vane of the official BLS numbers at the end of the week.
Expectations are for a number around 200k
, slightly down from the 215k in November. Anything close to this shouldn’t elicit too much of a market reaction ahead of Friday’s main event, but any surprises in the FOMC minutes later in the day might.
In comments made after the minutes outgoing Fed Chairman Bernanke seemed to suggest that he favoured a gradual tapering of $10bn a month
, as long as the data warranted it, and today’s minutes could go some way to determining whether this was a consensus view
of all on the committee, or whether it was a narrower view confined to some members of the FOMC.
We already know that Boston Fed chief Eric Rosengren
, who dissented from the original decision to taper, has now modified his view and swung behind the majority
, but that doesn’t really matter too much given he will lose his vote in 2014. If a number of other members back Bernanke’s view point then that could well be positive for the greenback, with Yellen’s views likely to be closely analysed for any future clues as to further action in the January meeting.
Another key focus will be around how much consensus there was to modifying the guidance
to keeping rates low well beyond the 6.5% unemployment threshold, as well as any concerns about deflationary pressures.
Before that we have the small matter of the latest November unemployment data
from the wider EU area and Italy as well.
took the positives from a good set of German unemployment data yesterday
; however it is hard to be overly optimistic to think this will translate into anything other than a disappointing set of numbers when looking at the unemployment numbers from Italy
which are expected to push to another all-time high of 12.6% for November
, leaving the broader EU unemployment rate
just below its record 12.2% level at 12.1%.
There should be some positives though given the strong German retail sales numbers
yesterday, with the likelihood that those numbers are likely to translate across to a better than expected retail sales number for the EU
which are expected to rise 0.1%, but could well come in much higher.
German factory orders
are also expected to rise 1.5% in November not completely offsetting the 2.1% decline seen in October, but certainly heading in the right direction.
Today also brings US Treasury Secretary Jack Lew to Berlin
for a meeting with Wolfgang Schaeuble which could well be an exercise in diplomacy given recent strong and not particularly well received criticism from the US Treasury about Germany’s economic policy, in relation to its trade surplus, which is expected to have increased today, and the lack of domestic demand in the German economy.
– while above 1.3570 trend line support from the 1.2760 July 2013 lows the current uptrend in the euro remains intact. A move below the trend line support has the potential to open up further losses towards 1.3475. Only a break below the 1.3475 level would then argue for a move to the lows in November at 1.3300 and 200 day MA.
The key resistance remains at 1.3885, which is long term trend line resistance from the all-time highs at 1.6040.
– the key support for the pound lies at 1.6320 trend line support from the 1.4815 lows in July. Only a break below 1.6250 retargets a move back towards 1.6110. While above this key support level the potential for rebounds back to 1.6520, and the highs last week remains, however last week’s daily bearish engulfing candle does raise the risk of a slide back towards the 1.6000 level.
– the December lows at 0.8252 remain an obstacle to a move towards the 0.8160/70 area which is a 61.8% retracement of the entire up move from the 2012 lows at 0.7755 to the highs last year at 0.8815. While above 0.8250 we do remain susceptible to a short squeeze back to the 0.8420 area.
– the US dollar is starting to look a little soft but continues to hold above the Ichimoku cloud support on the four hour chart for the time being and as such remains susceptible to a move back to the 105.50 area. Momentum does seem be stalling and a fall below cloud support could bring about a move towards 103.70 on a break below cloud support, currently at 104.10.
The 105.50 area the 61.8% retracement of the entire down move from the 2007 highs at 124.20 to the all-time lows in 2011 at 75.25 remains a key obstacle to further gains.
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