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It’s all about US non-farm payrolls tonight at 11:30pm (AEDT) and the market expects a lofty 200,000 jobs will be created. The range from economists is 275,000 - 150,000 and this is about as optimistic as I have seen in a while. Last night’s services ISM was slightly weaker than forecast, but the employment sub-component saw the biggest one-day increase ever (going from 47.5 to 53.6), while the ADP private payrolls (released on Tuesday) was also strong. I feel the market is probably positioned for a number closer to 220,000 so anything below 180,000 should see a reasonable USD sell-off. In saying that, a good number and it could start the USD off on a much stronger longer-term rally in my opinion.
Mario Draghi and the ECB may have left rates unchanged, but in the subsequent press conference he detailed a dovish message. In it, his easing bias was strengthened with language that went above and beyond what was priced in, showing a gritty determination to do whatever is needed to support prices should the eurozone slide into all out deflation. The discussion around all-out quantitative easing has certainly grown, and this is key. I still feel the ECB are on hold for the rest of the year and unlikely to print money to buy assets (although we don’t know which ones they would buy as yet). However we now have to firmly focus on the next CPI print on April 16. If this print is weak the EUR will be sold off aggressively. The EUR is now looking vulnerable and I feel EUR/USD can break 1.30 this year.
While the US payrolls always get the lion’s share of attention in the market, it’s always interesting to look at Canadian employment as well. The market expects to see 22,500 jobs created, however we need to remember this is a very volatile data point and prone to massive beats and misses. USD/CAD is finding good buyers around 1.10, however given the fairly bearish positioning against the CAD a good number could see USD/CAD sell-off.
On the weekly chart Brent Crude is testing, but respecting, the uptrend drawn from the 2012 low. A close below 105.76 tonight would be highly negative for the commodity.