Inflation and employment are the hottest topics that Central Banks consider daily. Today we have European inflation data as well as Canadian and US employment data. By the end of the day, I am sure it will all make sense but trading before and during these data releases could prove to be tricky.
It is going to be another busy day for the markets as there are plenty of scheduled news events that could be market moving. The London session will be dominated by European inflation, consumer confidence, sentiment, and business climate reports. Before that, we receive word from the UK Markit/CIPS Construction PMI report for December 2021.
Currently, the EURUSD is rising as flows into the single currency are keeping the most traded currency pair above 1.13100, though on a daily time frame the range is getting smaller. Anyone trading this before the US session is likely to see any long trades capped by the 1.3365 level and yesterday's high.
The forex heatmap shows a balanced market so it will be hard to pick a risk-on or risk-off direction this morning. After the European news drops there may be a clearer picture. The AUD is obviously being hit very hard this morning after the Asia-Pac session witnessed a draw on the Shanghai Stock Exchange, overall, the overnight session traded mixed. The Hang Seng is doing the best today so far and is up 1.82%, so we could see the Aussie flows return to the upside as the US dollar looks to be weakening.
The stronger euro today is going to weigh on the DXY but so could some good news out of Europe versus bad news from the US. Technically I am watching the $95.50 level as that looks like a double bottom which would be a great target for some traders looking to trip stops and grab some liquidity before pushing higher.
The USDCAD is still within its balance range with the 1.2700 acting as a magnet. If we get another push higher in the energy markets the USDCAD targets the 1.2600 level. This could also come on the back of better-than-expected unemployment data out of Canada which is released at the same time as the US NFP and jobs data.
In the US session, there is plenty to look forward to, as the ever more important US Non-Farm Payrolls for Dec are released. Expectations for where this number will land are within a very wide range of possibilities. The highest estimate is 720k which would follow the 800k from the ADP report earlier this week. The lowest estimate is for 150k which would be below the previous month's disappointing report. The consensus is for 400k, which is about 150k lower than where the Fed would like the number to land monthly if they are to see a full-employment figure return. The fact that US President Biden is speaking about the jobs report at 15:45, is slightly disconcerting. Will he be trying to put a positive spin on a failed report or lording the policies that have resulted in an outstanding report?
For myself, I won't be trading anything US equity-based until after 17:30 as Fed members are talking today, as they did yesterday which resulted in a balanced market.
The UK FTSE 100 is still bullish in my opinion while it trades above the significant 7400 level, but looking across the charts from the US indices, there is a bearish feel coming from across the Atlantic as the DJIA and Russell 2000 look to be dragging everything lower and back into the previous ranges.