Dollar remains firm in early US session after strong headline NFP number. But there is no follow through buying for the moment. Risk appetite also recede mildly as market head towards weekly close. Over the week, Dollar remains the strongest one, followed by Australian Dollar and then Canadian. Sterling is the weakest, followed by Yen and then Swiss Franc.

Technically, USD/CHF breaches 0.9766 resistance today, but there is no follow through buying yet. Rejection by this resistance will maintain bearishness for extending the down trend from 1.0237. But firm break there will confirm short term bottoming and bring rebound back to 1.0023 resistance. AUD/USD’s focus is back on 0.6670 and break there will resume medium term down trend.

In Europe, currently, FTSE is down -0.62%. DAX is down -0.64%. CAC is down -0.47%. German 10-year yield is down -0.0231 at -0.388. Earlier in Asia, Nikkei dropped -0.19%. Hong Kong HSI dropped -0.33%. China Shanghai SSE rose 0.33%. Singapore Strait Times dropped -1.55%. Japan 10-year JGB yield dropped -0.0186 to -0.034.

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US non-farm payroll rose 225, wages grew 0.2%

US non-farm payroll employment rose 225k in January, much better than expectation of 156k. That was notably higher than 175k monthly growth in 2019. Unemployment rate rose to 3.6%, up from 3.5%, above expectation of 3.5%. Participation rate edged up by 0.2% to 63.4%. Average hourly earnings, missed expectation and grew only 0.2% mom, below consensus of 0.3% mom.

Canada employment grew 34.5k in January, much better than expectation of 16.3k. Unemployment rate dropped to 5.5%, down from 5.6%, better than expectation of 5.7%.

Released earlier

Swiss foreign currency reserves dropped to CHF 764B in January. Italy retail sales rose 0.5% mom in December versus expectation of 0.2% mom. France trade deficit narrowed to EUR -4.1B in December versus expectation of -5.1%B. France industrial output rose 0.2% mom in December versus expectation of 0.0% mom. Germany industrial production dropped -3.5% mom in December versus expectation of -0.2% mom.

From Asia, China trade surplus narrowed to USD 39.2B in January, above expectation of USD 36.8B. Australia AiG performance of services index dropped from 48.7 to 47.4 in January. Japan labor cash earnings rose 0.0% yoy in December, household spending dropped -4.8% yoy, leading indicator rose form 90.8 to 91.6. Germany industrial production dropped -3.5% mom in December, trade surplus widened to EUR 19.2B.

RBA cut 2020 growth forecast, Lowe warned of coronavirus risks

RBA Governor Philip Lowe told a parliamentary economics panel that the board is “expecting progress to be made towards the inflation target and full employment”. But the progress will be “only gradual” with uncertainties. The board “has been discussing” the case of further easing. But considering the balance of pros and cons, RBA decided to keep cash rate unchanged this week.

Lowe added, “if the unemployment rate were to be moving materially in the wrong direction and there was no further progress being made towards the inflation target, the balance of arguments would tilt towards a further easing of monetary policy.”

Additionally, he also said it’s “still too early to tell” about the impact of China’s coronavirus outbreak. But he warned, “the impact is going to be large”. And, “given what we know at the moment”, the hit to Australian economy would be worse than SARS. He added, the outbreak could take 0.2% off the Australia’s growth. But, if the virus “persists for an extended period, the effect on economic activity is likely to be larger than currently projected,”

In the Statement of Monetary Policy, RBA cut 2020 year-average GDP growth forecast from 2.75% to 2.25%. But 2020 year-average GDP growth forecasts was held unchanged at 3.00%. Unemployment rate forecast was lowered from 5.25% to 5.00% by December 2020, and from 5.00% to 4.75% by December 2021. Headline CPI forecasts was unchanged at 1.75% by December 2020 and 2.00% by December 2021.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9733; (P) 0.9745; (R1) 0.9759; More

USD/CHF’s focus is now back on 0.9766 resistance. Rejection by this resistance will retain near term bearishness. Break of 0.9613 will resume whole down trend from 1.0237. Next target is 100% projection of 1.0237 to 0.9659 from 1.0023 at 0.9445. However, sustained break of 0.9766 will indicate short term reversal and bring stronger rebound to 1.0023 resistance next.

In the bigger picture, medium term outlook remains neutral as USD/CHF is staying sideway trading started from 1.0342 (2016 high). Fall from 1.0237 is a leg inside the pattern and could target 0.9186 (2018 low). In case of another rise, break of 1.0237 is needed to indicate up trend resumption. Otherwise, more sideway trading would be seen with risk of another fall.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
21:30 AUD AiG Performance of Services Index Jan 47.4 48.7
23:30 JPY Labor Cash Earnings Y/Y Dec 0.00% -0.10% 0.10%
23:30 JPY Overall Household Spending Y/Y Dec -4.80% -1.70% -2.00%
00:30 AUD RBA Monetary Policy Statement
05:00 JPY Leading Economic Index Dec P 91.6 90.8 90.8
07:00 CNY Trade Balance (USD) Jan 39.2B 36.8B 46.8B 47.2B
07:00 CNY Imports (USD) Y/Y Jan -1.50% 1.10% 16.50%
07:00 CNY Exports (USD) Y/Y Jan 9.10% -6.30% 7.90%
07:00 CNY Trade Balance (CNY) Jan 271B 262B 329B
07:00 CNY Exports (CNY) Y/Y Jan 13.90% -6.30% 9.00%
07:00 CNY Imports (CNY) Y/Y Jan 2.90% 19.10% 17.70%
07:00 EUR Germany Industrial Production M/M Dec -3.50% -0.20% 1.10% 1.20%
07:00 EUR Germany Trade Balance (EUR) Dec 19.2B 16.4B 18.3B
07:45 EUR France Trade Balance (EUR) Dec -4.1B -5.1B -5.6B -5.4B
07:45 EUR France Industrial Output M/M Dec 0.20% 0.00% 0.30% 0.20%
08:00 CHF Foreign Currency Reserves (CHF) Jan 764B 771B
09:00 EUR Italy Retail Sales M/M Dec 0.50% 0.20% -0.20%
13:30 USD Nonfarm Payrolls Jan 225K 156K 145K 147K
13:30 USD Unemployment Rate Jan 3.60% 3.50% 3.50%
13:30 USD Average Hourly Earnings M/M Jan 0.20% 0.30% 0.10%
13:30 CAD Net Change in Employment Jan 34.5K 16.3K 35.2K
13:30 CAD Unemployment Rate Jan 5.50% 5.70% 5.60%
15:00 USD Wholesale Inventories Dec F -0.10% -0.10%
15:00 CAD Ivey PMI Jan 52.3 51.9

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