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FOREX: Dollar May Retreat as US Jobs Growth Stokes Risk Appetite

By , Currency Strategist
06 January 2012 07:55 GMT

Talking Points

  • US Dollar May Pull Back as Jobs Report Stokes Risk Appetite
  • German Orders Data May Show Weaker Euro Helping Exports
  • Swiss Deflation to Deepen But Near-Term Intervention Unlikely
  • Australian Dollar Underperforms Amid Risk Aversion Overnight

The US Dollar (ticker: USDollar) continued to push higher overnight as Eurozone debt crisis fears weighed on Asian stock exchanges fell, stocking demand for the go-to safe haven currency. The MSCI Asia Pacific regional benchmark equity index lost 1.3 percent while the greenback gained as much as 0.2 percent having posted its strongest daily advance in nearly a month yesterday. The sentiment-linkedAustralian Dollar bore the brunt of the selloff – down as much as 0.6 percent against its US namesake.

Looking ahead, a lull in Eurozone debt crisis news shifts the spotlight to the outlook for global economic growth and the US Employment report. Expectations call for nonfarm payrolls to rise 155,000 in December, marking the largest jobs increase in three months. Absent an unexpected gloomy headline out of the currency bloc – such as the downgrade of a major European country like France, for example – this seems likely to boost risk appetite on hopes an accelerating recovery in the US will help offset the global economic slowdown expected this year. Such an outcome bodes ill for the safe-haven US Dollar against the stocks-correlated majors into the week-end, meaning the commodity bloc currency is likely to outperform while the Euro and the British Pound trail behind.

On the data front, German Factory Orders headline the docket in European hours. Expectations call for orders to fall 1.2 percent in the year through November, marketing the first negative reading in 25 months. The foreign demand component of the report ought to most interesting as traders gauge whether Euro weakness is helping to grow external demand, partially mitigating homegrown headwinds facing the Eurozone’s largest economy and the currency bloc at large.

Euro Zone Retail Sales are also on tap, with consensus forecasts pointing to the seventh consecutive month of contraction on the yearly reading. On balance, neither outcome offers anything particularly actionable in the immediate term and ought to pass with relatively little fanfare as the US jobs report looms ahead. Swiss Consumer Price Index numbers round out the docket, but deepening deflation seems unlikely to meaningfully boost Franc intervention expectations at least in the near term while SNB Chairman Philipp Hildebrand battles impropriety accusations amid reports his wife bought Dollars just three weeks before the central bank announced its EURCHF floor at 1.20, sending USDCHF soaring in the process.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

No Data

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

8:00

CHF

Foreign Currency Reserves (CHF) (DEC)

-

229.3B

Medium

8:15

CHF

Consumer Price Index (MoM) (DEC)

-0.1%

-0.2%

Medium

8:15

CHF

Consumer Price Index (YoY) (DEC)

-0.6%

-0.5%

Medium

8:15

CHF

CPI - EU Harmonised (MoM) (DEC)

-

-0.4%

Low

8:15

CHF

CPI - EU Harmonised (YoY) (DEC)

-

-0.8%

Low

10:00

EUR

Euro-Zone Business Climate Indicator (DEC)

-0.48

-0.44

Low

10:00

EUR

Euro-Zone Consumer Confidence (DEC F)

-21.2

-21.2

Medium

10:00

EUR

Euro-Zone Economic Confidence (DEC)

93.3

93.7

Low

10:00

EUR

Euro-Zone Industrial Confidence (DEC)

-7.5

-7.3

Low

10:00

EUR

Euro-Zone Services Confidence (DEC)

-2.1

-1.7

Low

10:00

EUR

Euro-Zone Retail Sales (MoM) (NOV)

-0.4%

0.4%

Medium

10:00

EUR

Euro-Zone Retail Sales (YoY) (NOV)

-0.9%

-0.4%

Medium

10:00

EUR

Euro-Zone Unemployment Rate (NOV)

10.3%

10.3%

Medium

11:00

EUR

German Factory Orders s.a. (MoM) (NOV)

-1.8%

5.2%

Medium

11:00

EUR

German Factory Orders n.s.a. (YoY) (NOV)

-1.2%

5.4%

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2660

1.2900

GBPUSD

1.5433

1.5594

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak

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06 January 2012 07:55 GMT