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Daily Pivots: (S1) 1.0281; (P) 1.0302; (R1) 1.0321; More...

EUR/USD recovered after brief breach of 1.0223 support and intraday bias remains neutral. With 1.0457 resistance intact, outlook stay bearish. On the downside, firm break of 1.0223 will resume the fall from 1.1213. However, sustained break of 1.0457 will confirm short term bottoming, and turn bias to the upside for 55 D EMA (now at 1.0533).

In the bigger picture, fall from 1.1274 (2023 high) should either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. In both cases, sustained break of 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will pave the way back to 0.9534. For now, outlook will stay bearish as long as 1.0629 resistance holds, even in case of strong rebound.

Daily Pivots: (S1) 1.2240; (P) 1.2306; (R1) 1.2375; More...

GBP/USD's decline continues today and intraday bias stays on the downside. Sustained trading below 1.2256 fibonacci level will carry larger bearish implications. Next target is 61.8% projection of 1.3433 to 1.2486 from 1.2810 at 1.1863. On the upside, break of 1.2532 minor resistance will turn intraday bias neutral first. Further break of 1.2486 support turned resistance should confirm short term bottoming.

In the bigger picture, price actions from 1.3433 medium term are seen as correcting whole up trend from 1.0351 (2022 low). Strong support is still expected from 38.2% retracement of 1.0351 to 1.3433 at 1.2256 to bring rebound to extend the corrective pattern. However, firm break of 1.2256 will argue that the trend has reversed and target 61.8% retracement at 1.1528.

Daily Pivots: (S1) 157.69; (P) 158.04; (R1) 158.51; More...

USD/JPY's rally continues today and intraday bias stays on the upside for 61.8% projection of 139.57 to 156.74 from 148.64 at 159.25. Firm break there will extend the rise from 139.57 to retest 161.94 high. However, considering bearish divergence condition in 4H MACD, firm break of 156.01 support will indicate short term topping. Intraday bias will then be back on the downside for 55 D EMA (now at 154.13) instead.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

The Canadian labour market ended 2024 on a very strong note, adding 90.9k positions in December, primarily in full-time positions (+57.5k).

The healthy job gain pushed the unemployment rate down 0.1 percentage point to 6.7%. The labour force participation rate was unchanged at 65.1%.

Employment by sector showed widespread gains, led by educational services (+17k), transportation and warehousing (+17k), finance, insurance, real estate, rental and leasing (+16k), and health care and social assistance (+16k).

Lastly, total hours worked jumped a massive 0.5% month-on-month, pointing to solid economic growth on the month. Meanwhile wages were up a more palatable 3.8% year-on-year (from 4.1% in November).

Key Implications

This was as positive a labour market report as we could expect. Despite all the negative talk on Canada's economy, the country keeps adding jobs. Importantly, these jobs were largely full-time, and in cyclically sensitive industries. The growth in hours worked was also encouraging, as this will help support the continued resurgence in consumer spending. Wage growth has also been moving towards the level that is consistent with inflation stabilizing around the Bank of Canada's 2% target.

Today's report puts a January rate cut into question. Despite fears related to U.S. action against Canada, the BoC doesn't make political calls on the outlook. However, post inauguration on January 20th, they may have sufficient information on whether lower interest rates are necessary to shore up the economy. This will need to be balanced against any reaction on the Canadian dollar, that might also be providing a buffer on trade at that time.

The U.S. economy added 256k jobs in December, well above the consensus forecast calling for a gain of 165k. Payroll figures for October were revised up by 7k (to 43k), while November was revised lower by 15k (to 212k), resulting in a total net revision of -8k over the two prior months.

• For the year, job growth totaled 2.2 million, down from 2023's 3.0 million, but a still solid year of hiring.

Private payrolls rose 223k – up from November's 182k – with the largest gains seen in health care & social assistance (+69.5k), leisure & hospitality (+43k), and professional & business services (+28k). The public sector added 33k new positions last month.

In the household survey, civilian employment surged by 478k – more than reversing November's sharp pullback – while the labor force grew by a smaller 243k, pushing the unemployment rate 0.1 percentage points lower to 4.1%. The labor force participation rate held steady at 62.5%.

• The household survey figures for December also included the usual updated seasonal adjustment factors. However, there was no discernable impact on monthly unemployment rate readings for 2024.

Average hourly earnings (AHE) rose 0.3% month-on-month (m/m), a tick lower than November's gain. On a twelve-month basis, AHE were up 3.9% (also a tick lower than November). Aggregate weekly hours rose 0.2% m/m, up from November's downwardly revised reading of 0.1% m/m (previously 0.4% m/m).

Key Implications

Non-farm payrolls end 2024 on a solid footing, coming in well above nearly all surveyed economist forecasts in Bloomberg. Smoothing through the recent volatility, job growth averaged 170k per-month in the fourth quarter, down from Q4-2023's monthly average of 212k. Meanwhile, the unemployment rose by 0.3 percentage points last year, but remains low at 4.1%.

There were virtually no signs underlying weakness in the labor market in this morning's employment report. And with progress on the inflation front showing signs of stalling in recent months, Fed officials have all the evidence they need to slow the pace of rate cuts. We still a view a March cut as likely (Fed futures are currently pricing a less than 25% probability for a March cut), though the next few months of data will be critical in shaping the final decision.

Daily Pivots: (S1) 0.9101; (P) 0.9117; (R1) 0.9137; More…

USD/CHF's rally resumed by breaking through 0.9136 and intraday bias back on the upside. Current rise from 0.8374 will now target 0.9223 key resistance next. Decisive break there will carry larger bullish implications. For now, near term outlook will stay bullish as long as 0.9007 support holds, in case of retreat.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with rise from 0.8374 as the third leg. Overall outlook will continue to stay bearish as long as 0.9223 resistance holds. Break of 0.8332 low is in favor at a later stage when the consolidation completes. However, decisive break of 0.9223 will be an important sign of bullish trend reversal.

Dollar is charging higher in early US session, buoyed by a strong set of employment data. Non-farm payrolls surged well above expectations in December, while the unemployment rate unexpectedly ticked lower. This set of data solidified the market's belief that Fed will pause rate cuts at its upcoming meeting later this moth, with the probability now exceeding 97%. Adding to the hawkish sentiment, odds for a rate hold in March have also risen sharply, now exceeding 70%, signaling that Fed may extend its pause in easing longer than previously anticipated.

The robust jobs data weighed heavily on equity and bond markets. DOW futures plunged more than -300 points in early trading, while NASDAQ futures shed over -1%. Treasury yields have also surged, with the 10-year yield setting its sights on the critical 4.8% level. Both these movements are unequivocally supportive for Dollar.

While Dollar's momentum appears solid, market participants might turn cautious ahead of the weekend. With President-elect Donald Trump's inauguration just days away, traders are wary of surprises or new trade policy developments that could inject volatility into the markets. Profit-taking may emerge before the weekly close.

Overall, despite Dollar's strong showing, Loonie remains the week's best performer, with Canada’s robust labor market report is flooring its selloff. Meanwhile, Euro continues to hold its ground as the third-strongest currency, benefitting from sterling's continued weakness.

At the bottom of the leaderboard, the Pound is staying as the weakest amid concerns over the UK government's fiscal challenges. At the same time, Aussie and Kiwi are the next worst. With equity markets under strain, further declines in risk-sensitive assets could deepen the antipodeans' losses. Swiss Franc and Japanese Yen are holding the middle positions.

US NFP grows 256k, unemployment rate ticks down to 4.1%

US labor market showcased its resilience in December, with non-farm payrolls surging by 256k, significantly outpacing expectations of 150k. This impressive figure also surpassed the average monthly gain of 186k for 2024.

Unemployment rate edged down to 4.1%, beating forecasts of remaining steady at 4.2%. This marks the seventh consecutive month where the unemployment rate has hovered within a tight range of 4.1% to 4.2%, reflecting a steady labor market. Meanwhile, the labor force participation rate held steady at 62.5%, a level consistent with its range since late 2023.

Wage growth showed a measured pace, with average hourly earnings rising by 0.3% mom, in line with market expectations. On a yearly basis, wage growth softened slightly to 3.9% from 4.0% yoy previously.

Canada's employment rises 91k in Dec, unemployment rate down to 6.7%

Canada's labor market closed 2024 on a strong note, with employment soaring by 91k in December, far exceeding expectations of 24.9k. Full-time positions accounted for a significant portion of the gains, with 56k new roles added.

Unemployment rate fell to 6.7%, defying expectations of an increase to 6.9%, and marked an improvement from the previous month's 6.8%. Employment rate also increased by 0.2 percentage points to 60.8%, marking the first uptick since January 2023.

Total hours worked rose 0.5% mom and were 2.1% higher than a year earlier. Meanwhile, average hourly wages grew 3.8% yoy, a deceleration from November’s 4.1% yoy.

Japan’s household spending falls for fourth month, minister flags critical economic transition

Japan’s household spending declined for the fourth consecutive month in November, falling -0.4% yoy. While this was an improvement from October's -1.3% drop and surpassed expectations of -0.8%, it still reflects ongoing consumer caution.

The decline was driven by significant cuts in expenditures on home appliances and food, highlighting weak domestic demand.

Spending on furniture and electric appliances plummeted by -13.8%, marking the third straight month of decline, while clothing and footwear saw a similar drop -of 13.7%, down for the second consecutive month. Food purchases also contracted slightly, falling by-0.6%.

Separately, Economy Minister Ryosei Akazawa acknowledged the challenges, stating that Japan's economy is at a "critical stage" in shifting public sentiment away from deflation and toward sustainable growth driven by higher wages and investment.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9101; (P) 0.9117; (R1) 0.9137; More…

USD/CHF's rally resumed by breaking through 0.9136 and intraday bias back on the upside. Current rise from 0.8374 will now target 0.9223 key resistance next. Decisive break there will carry larger bullish implications. For now, near term outlook will stay bullish as long as 0.9007 support holds, in case of retreat.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern, with rise from 0.8374 as the third leg. Overall outlook will continue to stay bearish as long as 0.9223 resistance holds. Break of 0.8332 low is in favor at a later stage when the consolidation completes. However, decisive break of 0.9223 will be an important sign of bullish trend reversal.

Canada's labor market closed 2024 on a strong note, with employment soaring by 91k in December, far exceeding expectations of 24.9k. Full-time positions accounted for a significant portion of the gains, with 56k new roles added.

Unemployment rate fell to 6.7%, defying expectations of an increase to 6.9%, and marked an improvement from the previous month's 6.8%. Employment rate also increased by 0.2 percentage points to 60.8%, marking the first uptick since January 2023.

Total hours worked rose 0.5% mom and were 2.1% higher than a year earlier. Meanwhile, average hourly wages grew 3.8% yoy, a deceleration from November’s 4.1% yoy.

Full Canada job data release here.

US labor market showcased its resilience in December, with non-farm payrolls surging by 256k, significantly outpacing expectations of 150k. This impressive figure also surpassed the average monthly gain of 186k for 2024.

Unemployment rate edged down to 4.1%, beating forecasts of remaining steady at 4.2%. This marks the seventh consecutive month where the unemployment rate has hovered within a tight range of 4.1% to 4.2%, reflecting a steady labor market. Meanwhile, the labor force participation rate held steady at 62.5%, a level consistent with its range since late 2023.

Wage growth showed a measured pace, with average hourly earnings rising by 0.3% mom, in line with market expectations. On a yearly basis, wage growth softened slightly to 3.9% from 4.0% yoy previously.

Full US non-farm payrolls release here.

AUD/USD remains firmly in red and pressuring key support at 0.6170 (2022 low) after a brief recovery was repeatedly rejected above falling 20DMA and formed a double bull-trap on daily chart.

Bearish daily studies maintain downside pressure, though further headwinds in this zone should be anticipated as indicators are entering oversold territory.

On the longer run, the Aussie dollar may come under increased pressure if Trump’s administration proceeds with promised tariffs on China, while near-term focus is on US labor report (due later today) which would provide fresh direction signals.

Sustained break of 0.6170 trigger to open way for test of Fibo support at 0.6099 (76.4% retracement of 0.5509/0.8087) and expose psychological 0.60 level.

On the flip side, falling 10DMA offers immediate resistance at 0.6209, followed by more significant barriers at 0.6246 (20DMA) and 0.6302 (Jan 6 recovery spike), with break of the latter to sideline larger bears and allow for possible stronger correction.

Res: 0.6209; 0.6246; 0.6302; 0.6330.
Sup: 0.6170; 0.6099; 0.6040; 0.6000.