Friday’s Non-Farm Payrolls hold up and more election risk for the week ahead

Markets opened at 4 p.m. New York time due to daylight savings and the U.S. Dollar surged on positive news that no charges were warranted in the FBI’s probe of Democrat Clinton’s private email server.

Seen as the status quo candidate in the upcoming election, this news sent the U.S. Dollar opening higher. Before going into next week’s chart setups, here’s a recap on the events so far:

  • November’s NFP added 161K jobs disappointing from 174K expectations
  • U.S. unemployment rate once against drops 0.1% down to 4.9%
  • Commitment of Traders report showed a slight cutback in non-commercial Yen long positions signaling slightly stronger U.S. Dollar
screenshot-at-nov-06-21-25-25
COT Report: Japanese Yen

Early October was when we’ve seen the largest long position on the Japanese Yen and now we begin to see the unloading of this position. With Clinton still a few points ahead in the polls and strong payrolls figures, this continues to be an indication of a possible December rate hike.

While the U.S. markets remain optimistic, the USDCAD pair continues to have the greatest upwards potential given the disappointing employment figures released at the same time of the U.S. payrolls.

While at first glance Canada reported a 44k job gain, this comes at the expense of full time employment. Part-time employment rose by 67k while full-time workers dropped 23k spots. This continues to signal fearful market conditions in Canada. Of the decrease in full-time employment, a significant amount was in manufacturing and natural resources posing an increased trade deficit yet to come.

screenshot-at-nov-06-21-43-11
USDCAD: Daily

USDCAD broke out above a massive daily wedge consolidation. If this 1.33~ price level holds up, we can expect to see a major move up to the Fibs assisted supply zone at the 1.3720~ mark.

This trade has two fundamental risks involving Tuesday’s election as well as December’s rate hike. Both are around 70% priced in with expectations of a Clinton candidacy and a modest 0.1% to 0.25% rate hike in December. If either or both occur as expected, we will most likely observe adverse effects on the U.S. Dollar especially given that long positions have been built up since early May of this year bottoming out at the 1.245~ price level.

Currently, as of market open, I am in a short position on the AUDUSD pair off of a technical level.

screenshot-at-nov-06-22-02-10
AUDUSD: 4-Hour

There’s nothing really to say about this other than I am treating it as a standard range play. Hopefully, volatility will pickup now that we’re in the Sydney Tokyo sessions and entering London soon.

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