The US payroll figure still traps in slow recovery

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Fundamental Outlook

The US payroll figure signaled slow recovery in US last Friday.
Manufacturing was seen in mild gain probably due to weak dollar over last two months, but hiring remains sluggish. China officials said they will continue to support Europe and euro currency using part of national reserves US$2.65 trillion. British pound is reboun-ding in short-term trend but still trapped in down trend outlook due to general loss of consumer confidence.

The US factory orders in November rose unexpectedly at 0.7 per cent and above median forecast.

The services index reported by Institute for Supply Management (ISM) also climbed to 57.1 in December versus 55 in prior month. The initial jobless claims for the week ended January 1 rose by 18,000 to 409,000, in line with the median forecast.

Before the weekend, US Labor Department said the non-farm payroll rose only 103,000 in December, much lower than the consensus figure 150,000 increment. Unemployment dropped to 9.4 per cent. The data showed slower recovery in job markets.

In Europe, German unemployment hiked in December to 3.15 million after seasonally adjusted with 3,000 jobs loss. Unemployment rate remained at 7.5 per cent. German factory orders rose to 5.2 per cent in November compared to just 1.6 per cent in prior month.

Among the 16 nations, another index that marks the European confidence jumped to 106.2 in December from prior month 105.1, highest in past three years.

The UK manufacturing expanded at the fastest pace in December over past 16 years as exports drove orders.

A survey conducted by Markit Economics and the Chartered Institute of Purchasing and Supply showed factory production rose to 58.3 from a revised 57.5 in November.

However, data for UK service industries fell in December since April 2009 to 49.7 from prior month 53 due to slow recovery of economy. Market economists comment the recent weak UK pound could be ideal for driving up exports but the consumer demands are still hung in fatigue from slow recovery.

Technical Forecast

US dollar/Japanese yen reached high 83.68 on stronger dollar last week. In coming week, we expect the market to retreat to 82.00 regions while the topside still capped at 83.50 – 84.00 regions. The overall range from 81.00 – 84.00 will continue to constrict the market for some time until a drastic fundamental change in US or Japan injects forces into making a new trend.

Euro/US dollar broke the previous supports at 1.3050 and 1.2960 consecutively. We have abandoned the view of likelihood in climbing to 1.3700 as speculated last week. Weak U.S. job data has driven the euro down with uncertainty in coming week. The market may be prone to further decline for testing 1.2800 regions but turning and settling above 1.2960 will literally mean a consolidation will occur. The current resistance is identified at 1.3150 regions.

The UK pound sterling/USD has very strong technical resistance lying at 1.5600 – 1.5650 regions after coming up on last Friday. If these resistances can guard the market well, we reckon the bear will resume and drive down to 1.5350 regions in coming week.

Among the three major pairs, pound is less likely to lean on the dollar strength but will depend largely on own domestic data to decide the direction of market.

Disclaimer: This article was written for general information only. No liability by the writer or newspapers.

DAR Wong is the founder of PWFOREX.com with 21 years of trading experience in global Derivatives & FX markets. He can be reached at [email protected]

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