Mid-Day Report: NFP Rose 243k, Unemployment Dropped to 8.3%, Dollar Mixed in Initial Reaction

Non-farm payroll report showed much larger than expected expansion in US job market by 243k in January, versus consensus of 150k. That's the beset number in nine months and even better than December's impressive 203k, revised up from 200k. Unemployment rate dropped again for the fifth straight month to 8.3%, lowest in three years. In spite of the strong data, dollar is mixed, staying in range against European majors, up against yen. The upcoming US session will be interesting in deciding whether risk rally would take off again, in particular in whether DOW could take out 12876 high decisively, and take commodity currencies higher with it.

Employment data from Canada was disappointing. The economy added just 2.3k jobs in January, comparing to expectation of 24.5k. Unemployment rate rose to 7.6%, hitting a nine-month high. UK PMI unexpectedly rose from 54 to 56 in January, beating expectation of a fall from 53.3. Also, that's the best number in 10 months. The data provided some evidence that UK recovery is regaining momentum. Released earlier this week, manufacturing PMI rose from 49.6 to 52.1 in January. Both data are raising the prospect that UK GDP would expand in Q1 and avoid a technical recession, that is contraction in GDP for two consecutive quarters. Other data from Europe saw Eurozone PMI manufacturing revised lower to 50.4 in January while retail sales dropped -0.4% mom in December.

Japan's verbal intervention in the markets continued today as Finance Minister Azumi warned that recent rise in yen appeared "one-sided" and pledged "decisive steps" would be taken to half the movements. Azumi emphasized that there is no change in his stance and "if there is one-sided movement, I will take decisive steps". But again, we'd highly skeptical on the impact and sustainability of unilateral intervention.

Talking about intervention, EUR/CHF is still hovering just around 50 pips above SNB's floor of 1.2. SNB interim head Thomas Jordan was reported yesterday saying the central bank would enforce the minimum Swiss franc exchange rate against the euro "with the utmost determination". Nonetheless, we'd believe there is little scope of rebound in the cross before SNB formally name a new president and when markets start to speculate raising of the 1.2 floor again.

In Greece, Prime Minister Papademos said today in a statement that "we are in the final phase of this very critical process to shape a new financing program for Greece and to complete the loan agreement which will lighten the burden of public debt and ensure funding for years to come." Other than that, nothing is released so far and markets are still waiting for completion of the PSI, as well as OSI deals.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3087; (P) 1.3141 (R1) 1.3198; More.

EUR/USD continues to stay in tight range initially after release of stronger than expected NFP data. Intraday bias remains neutral for the moment. On the upside, sustained break of 38.2% retracement of 1.4246 to 1.2625 at 1.3244 will resume the rebound from 1.2625 and target 61.8% retracement at 1.3627. On the downside, break of 1.2931 minor support will suggest that corrective rise from 1.2625 was already finished and the larger decline from 1.4939 is likely resuming for a new low below 1.2625.

In the bigger picture, price actions from 1.6039 are unfolding as a consolidation pattern in the long term and is in progress. Fall from 1.4939 is a falling leg inside the pattern. It's hard to anticipate the length of a leg of any complex corrective pattern. Also, price actions would likely remain choppy and indecisive with misleading momentum indicator readings. But after all, overall picture still favors deeper fall to 1.1875 support before the consolidation pattern completes. Though, sustained trading above 55 weeks EMA (now at 1.3653) will pave the way for a test on 1.4939 resistance level.

Economic Indicators Update

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