Mid-Day Report

Canadian Dollar Surges after Stellar Job Data, Dollar Cautious as Senate Tax Debate Resumes

Typography

Canadian Dollar rebound strongly in early US session after stellar economic data. The employment market grew 79.5k in November, more than double of prior month's 35.3k and was well above expectation of 10k. Unemployment rate also dropped to 5.9%, down from 6.3%, way below expectation of 5.9%. USD/CAD reached as high as 1.2908 yesterday on Dollar strength. But the current sharp fall and break of 1.2804 support suggests rejection from 1.2916 key resistance. And consolidation from there is extending with another decline, possibly back to 1.2665 support. Also from Canada, GDP grew 0.2% mom in September, above expectation of 0.1% mom.

The greenback, on the other hand, remains cautiously soft as markets await Senate vote on tax bill. There will be a marathon vote on amendments today. A key focus would be on details of how future deficits would be addressed. The Joint Committee on Taxation found that the Senate's version of the bill could only generate USD 458b in revenue from boosted growth. That's far from being above to cover the USD 1.4T loss. Republicans are expecting to pass the bill finally by tonight. But there are still uncertainties as Republicans can only lose two votes due to slim 52 majority.

UK and Eurozone manufacturing PMIs improved

UK PMI manufacturing jumped to 58.2 in November, up from 56.6 and beat expectation of 56.5. That's also the highest reading in over four years since August 2013. Markit noted that "on its current course, manufacturing production is rising at a quarterly rate approaching 2 percent, providing a real boost to the pace of broader economic expansion". However, "manufacturers have seen supply-chain constraints and rising demand for raw materials overtake exchange rate effects as the primary motivator of price increases."

From Eurozone, Eurozone PMI manufacturing was revised up by 0.1 to 60.1 in November. Germany PMI manufacturing was unrevised at 62.5. France PMI manufacturing was revised up by 0.2 to 57.7. Italy PMI manufacturing rose to 58.3 in November. From Swiss, PMI manufacturing rose to 65.1 in November up from 62.0 and beat expectation of 62.5.

China Caixin PMI manufacturing missed expectations

The Caixin manufacturing PMI for China slipped to 50.8 in November, from 51 in October. The reading also missed expectations of 51. Looking into the details, production and new orders increased at modest rates, while purchasing costs rose sharply. However, confidence towards the business outlook dropped to joint-lowest on record. As the agency noted, the manufacturing sector remained stable for most of November, despite 'some signs of weakness'. It forecast that the economy would remain stable for 4Q17. More in

Released earlier today, Japan national CPI rose to 0.8% yoy in October, Tokyo CPI was unchanged at 0.6% yoy in November. Inflation stays well below the 2% target and justify BoJ's massive stimulus. Also from Japan, unemployment rate was unchanged at 2.8% in October, household spending rose 0.0%. Japan capital spending rose 4.2% in Q3. PMI manufacturing was revised down to 50.8 in November. Also released, New Zealand terms of trade index rose 0.7% qoq in Q3, below expectation of 0.7% qoq.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.2822; (P) 1.2847; (R1) 1.2890; More....

USD/CAD's sharp fall and break of 1.2804 support indicates rejection from 1.2916. Consolidation from 1.2916 is extending with another falling leg. Intraday bias is turned back to the downside for 1.2665 support or possibly below. Still, we'd expect downside to be contained by 1.2598 resistance turned support and bring rise resumption. On the upside, decisive break of 1.2916 will confirm resumption of whole rally from 1.2061. In that case, USD/CAD should target 1.3065 medium term fibonacci level next.

In the bigger picture, USD/CAD should have defended 50% retracement of 0.9406 (2011 low) to 1.4689 (2016 high) at 1.2048. And with 1.2048 intact, we'd favor the case that fall from 1.4689 is a correction. Rise from 1.2061 medium term bottom should now target 38.2% retracement of 1.4689 to 1.2061 at 1.3065. Firm break there will target 1.3793 key resistance next (61.8% retracement at 1.3685). We'll now hold on to this bullish view as long as 1.2450 support holds.

USD/CAD 4 Hours Chart

USD/CAD Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
21:45 NZD Terms of Trade Index Q/Q Q3 0.70% 1.30% 1.50% 1.40%
23:30 JPY Unemployment Rate Oct 2.80% 2.80% 2.80%
23:30 JPY Overall Household Spending Y/Y Oct 0.00% -0.30% -0.30%
23:30 JPY National CPI Core Y/Y Oct 0.80% 0.80% 0.70%
23:30 JPY Tokyo CPI Core Y/Y Nov 0.60% 0.60% 0.60%
23:50 JPY Capital Spending Q3 4.20% 3.20% 1.50%
00:30 JPY PMI Manufacturing Nov F 53.6 53.8 53.8
01:45 CNY Caixin PMI Manufacturing Nov 50.8 51 51
08:30 CHF PMI Manufacturing Nov 65.1 62.5 62
08:45 EUR Italy Manufacturing PMI Nov 58.3 58.3 57.8
08:50 EUR France Manufacturing PMI Nov F 57.7 57.5 57.5
08:55 EUR Germany Manufacturing PMI Nov F 62.5 62.5 62.5
09:00 EUR Eurozone Manufacturing PMI Nov F 60.1 60 60
09:30 GBP PMI Manufacturing Nov 58.2 56.5 56.3 56.6
13:30 CAD GDP M/M Sep 0.20% 0.10% -0.10%
13:30 CAD Net Change in Employment Nov 79.5K 10.0k 35.3k
13:30 CAD Unemployment Rate Nov 5.90% 6.20% 6.30%
14:30 CAD Manufacturing PMI Nov 54.3
14:45 USD Manufacturing PMI Nov F 53.8 53.8
15:00 USD ISM Manufacturing Nov 58.3 58.7
15:00 USD ISM Prices Paid Nov 67.8 68.5
15:00 USD Construction Spending M/M Oct 0.50% 0.30%