NFP big miss! But does it matter to the Fed?

Inflation and the Omicron variant of the coronavirus will be more in focus as the committee decides if they should increase the pace of tapering

Jobs 1

Non-Farm Payrolls from the US for November were +210,000 vs an expected increase of 550,000.  October’s print was revised slightly higher from +531,000 to +546,000.  Unemployment number dropped from 4.6% to 4.2% in October.  Expectations were for a drop to 4.5%.  This may be the biggest takeaway from the data.  Why?  Because it dropped by such a large amount with an increase in the labor force participation rate from 61.6% to 61.8%.  Average Hourly Earnings missed slightly, with a print of 0.3% MoM vs 0.4% MoM expected. 

What are Non-Farm Payrolls?

Despite the bad print in the Non-Farm Payroll data, this is likely to mean little to the FOMC committee when they meet on December 14th and 15th.  The Fed is likely to focus on the inflation component when deciding to raise interest rates.  The Fed has told us that both inflation and maximum employment goals have been achieved.  However, Powell testified earlier in the week that he is retiring the word “transitory” and that the FOMC would discuss increasing the pace if tapering at their next meeting.  Therefore, traders have been led to believe that inflation is the focus, not jobs. Also, the Omicron variant of the virus will be in the forefront of their minds!

Everything you need to know about the Federal Reserve

USD/CAD has been hovering around horizontal support (former highs) at 1.2775 for the last 5 trading days.  With Crude falling aggressively since late October, its no wonder that USD/CAD has been bid.  Notice that the correlation coefficient between USD/CAD and Crude Oil is -0.93.  This is a strong negative correlation which indicates that when one asset moves higher, the other moves lower.  It is also sitting just above an upward sloping trendline dating back to July (green line).  Resistance at previous highs near 1.2896 (and the top trendline of a channel on the 60 minute) and 1.2949.  However, 1.2990 (red line) has been an important level for traders going back to pre-covid.

usdcad daily ci

Source: Tradingview, Stone X

 

Trade USD/CAD now: Login or Open a new account!

• 
Open an account in the UK
• 
Open an account in Australia
• 
Open an account in Singapore

 

By the way, Canada also released jobs data today, and it was MUCH better than expected, at +153,700 vs +35,000 expected.  The Unemployment Rate dropped from 6.6% to 6%!  As a result of the simultaneous data release, USD/CAD fell from 1.2826 down to the bottom trendline of the upward sloping channel on the 60-minute timeframe that the pair has been in since early November, near 1.2744.  However, crude and the US Dollar remain the driver.  With the US Dollar bid since the data, USD/CAD has been bid as well.  1.2810 is intraday resistance ahead of the day’s highs at 1.2845.  Below the bottom trendline, are numerous levels of horizontal support down to the channel lows.  The first levels are 1.2713 and 1.2677.

20211203 usdcad 60 ci

Source: Tradingview, Stone X

Although the headline print was weaker than expected, it shouldn’t matter to the FOMC when they meet in mid-December.  Inflation and the Omicron variant of the coronavirus will be more in focus as the committee decides if they should increase the pace of tapering or not!

Learn more about forex trading opportunities.


Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.