Markets were pretty quiet today during the European session although you could feel that the safe havens were still under pressure as they have been for most of the week. The sentiment has improved this week on softer tones from China and the US and as a result, Gold and the JPY turned bearish, while risk assets such as commodity Dollars have turned quite bullish. We heard some comments from Kudlow today, saying that US and China will pick up trade negotiations in October which improved the sentiment further, sending risk assets on another bullish run.

But, the main events today were the release of the US and Canadian employment reports. The unemployment rate remained unchanged in Canda at 5.7% but new jobs jumped much higher than expected, which turned the CAD bullish. In the US, the unemployment rate remained unchanged as well at 3.7%, while the participation rate increased by 2 points. That’s a positive thing since unemployment would have lost 2 points if participation rate had remained unchanged. Earnings also came above expectations but, traders were focused more on new jobs which missed expectations. they posted a 130k increase last month, but that didn’t satisfy USD traders and soft increase in private payrolls was enough to turn the USD even more bearish.

The European Session

• German Industrial Production – yesterday we saw a big decline in factory order in Germany for August as the number came at -2.7%. Today, the industrial production was expected to increase by 0.4% but it came in negative and declined by 0.6% instead. This is the third decline in the last four months so things are getting worse in Germany instead of improving.
• Italian Retail Sales – The retail sales report released last month showed a nice jump of 1.9% in June, which was impressive after three negative months. Today’s report was expected to show a 0.4% growth in sales for July, but it came in negative instead, showing a 0.5% decline for that month.
• Eurozone Final GDP – The initial GDP reading for Q2 came in at 0.2% and it was expected to remain unchanged in the final reading today. It did remain unchanged at 0.2% QoQ,but the YoY GDP was revised higher from 1.1% to 1.2%. The final reading of employment change also remained unchanged at 0.2% for Q2.
• Boris Johnson is Confident to get A Deal – The UK PM Boris Johnson said earlier today that he is going to Brussels to get a deal. People in the UK want us to get on and leave on 31 October. He is confident of getting a Brexit deal at the October EU council summit. Labour must have the guts to have an election and he is not willing to contemplate resigning.

The US Session

• US Employment Report– The unemployment rate remained unchanged at 3.7% as expected, although, the participation rate increased to 63.2% from 63.0% previously, which is a positive sign. Unemployment rate would have decline by 2 points if the participation rate didn’t increase. But August non-farm payrolls came below expectations at 130K against 160K anticipated.
• US Earnings Report – Earnings were expected to have grown by 0.3% in August. But earnings came in better than expected, increasing by 0.4% last month against 0.3% anticipated. Average hourly earnings YoY came better as well, increasing by 3.2% on an annualized basis, against 3.0% expected. Previous average hourly earnings YoY were revised higher to 3.3% from 3.2% previously.
• Canadian Earnings Report – The unemployment rate remained unchanged at 5.7% as expected in Canada. Employment change came in much better than expected, showing a 81.1k increase in August, against 18.9k expected. This jump in new jobs comes after two negative months, which has caught the market by surprise. Hourly wage rate came in at 3.8% versus 4.5% estimated. Prior month stood at 4.5%.
• Trades in Sight

Bearish USD/JPY

• The main trend is still bullish on H1 chart
• The pullback lower is complete
• The 50 SMA is providing support

The decline stopped at the 50 SMA

USD/JPY has been bearish for quite some time on larger time-frames. But this week this pair has turned bullish as the sentiment has improved. The USD has been weak, but the JPY is even weaker. Although we saw a retrace lower earlier today after the US employment report, but that decline stopped right at the 50 SMA (yellow). Now this pair is almost oversold and the price is starting to bounce of the 50 SMA, so we are bullish on this pair. We went long on USD/JPY a while ago.

In Conclusion

So, the USD has turned bearish again after the US employment report which leaned considerably on the positive side, especially the earnings. But, the focus was on the payrolls which came a bit weaker than expected, especially the private payrolls, which means that the USD is closing the weak in a bearish footing.