Market Euphoria Continues, USD supported by Solid Data

Investors Keep Cheering on Reports of Virus Cure and China’s Move to Cut Tariffs

The dollar traded higher against the majority of the other G10 currencies on Wednesday and during the Asian morning Thursday. It gained versus CHF, JPY, EUR, GBP and NZD in that order, while it underperformed versus NOK, AUD, SEK and CAD.

FTSE 100 — Technical Outlook

After rebounding from its medium-term upside support line drawn from the low of October 3 rd, the FTSE 100 pushed sharply to the upside and continues to move in the northern direction together with the rest of the major indices. In addition to that, the index formed somewhat of an inverted head-and-shoulders pattern and broke its “neckline” at 7442. This morning, the cash index is already above the high of January 29 th, at around the 7515 mark, which just helps the bulls to feel more confident with themselves. Given the steep uprise, although there is a chance to see a small correction lower, still, we will take a somewhat bullish approach, at least for now.

US Data Support Greenback Ahead of NFPs

Apart from the headlines over the virus and the tariffs, US indices may have been aided by domestic data as well, and this is also evident by the dollar’s relative strength against most the other G10s. Yesterday, the ADP reported that the private sector has gained 291k jobs, much more than December’s downwardly revised 199k. This may have raised speculation that the NFP, due out tomorrow, may also exceed its 160k forecast by a large margin. At this point though, we need to repeat for the umpteenth time that the ADP is far from a reliable predictor of the NFP number. Taking data from back in January 2011, the correlation of those two time-series at the time of the release (no revisions are taken into account) is standing at 0.41.

USD/CHF — Technical Outlook

From around the beginning of January, USD/CHF continues to move within a short-term range, roughly between the 0.9630 and 0.9762 levels. Recently, after rebounding from the lower side of that range, the pair has moved closer to testing the upper bound. Although there is slightly more positivity in the bull-bloc, we need to see a strong break above the 0.9762 barrier, before examining a possible further uprise. This is why, for now, we will stay neutral, but keep a close eye on the upper bound of the range.

As for Today’s Events

On today’s agenda, we have the US initial jobless claims for last week, which are expected to have ticked down to 215k from 216k the week before. We also have the preliminary Unit Labor Costs index for Q4, which is expected to have slowed to +1.4% qoq from 2.5% qoq in Q3.

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