Risk assets got a minor boost higher early in the morning, after China said that they would look at tariff waivers for some US farm products, although it comes with an indirect caveat. That added up to Donald Trump’s comments yesterday that talks with China are going well, as well as Bloomberg’s report that the Phase One deal will be official from December 15. China promised to lift some of the US tariffs, but, markets were concerned about the US employment report today, so traders were being cautious as we approached the release time.

The US employment report was much better than expected, with non-farm payrolls coming much higher than expected for October, and the previous month being revised higher as well. The unemployment rate ticked lower, but earnings missed slightly expectations. But the earnings number for October was revised higher, which more than made up for the miss in November’s number. GOLD made a big bearish reversal after that report.

The employment report from Canada on the other hand, was much worse than expected, with unemployment rate jumping 4 points higher to 5.9% and employment declining by a massive 71k, which went against expectations of an increase in employment. If participation rate had remained the same, unemployment would have moved to 6.0%. On another front, OPEC+ decided to cut Oil production further by 50k barrels/day, but crude Oil doesn’t seem impressed with it.

The European Session

• China Is Retaliating After the Xinjiang Bill – The US Senate passed a bill on human right on Xinjiang political prisoners earlier this week. Today, the Chinese state media was reporting, citing the foreign ministry, saying that China says it is taking countermeasures against US sanction on Chinese officials. China has notified US embassy about the countermeasures, but urges US to remove sanction on Chinese officials.
• German Industrial Production  – German industrial production has been volatile for a long time, but leaning more on the negative side. In the last four months, industrial production has declined three times. It was expected to turn positive in October and increase by 0.1%, after the 0.6% decline in September. But, it remained negative, posting a big decline of 1.7% for October.
• Brexit Commentary – Labour leader Jeremy Corbyn said early today that UK prime minister Boris Johnson is misleading voters on Brexit. Corbyn is claiming that he has “cold hard evidence” that shows the impact of a Brexit deal on large parts of the country and the “issue of Northern Ireland in particular”, citing a confidential government report at hand. Later on, UK PM Johnson replied that Corbyn document is ‘complete nonsense’. There will be no checks going between Northern Ireland and Britain. Have not seen document presented by Labour but it is ‘complete nonsense’. Meanwhile, the Ipsos poll for UK election showed that Conservatives were at 44% (unchanged), Labour 32% (+4).
• OPEC+ to Cut Production Further – OPEC+ countries are meeting in Vienna to discuss Oil output and prices as well. We have heard comments in the last few weeks, suggesting that the cartel will cut Oil production further, particularly from Saudi Arabia, but we also have heard opposing comments from other OPEC+ countries, most notably Russia. Earlier in the day, Saudi oil minister, Prince Salman Bin Abdulaziz made a few comments as below:
  • Market will have to trust us
  • OPEC is trying to show analysts that we’re doing our job
  • World economy will continue to be well supplied
  • But further commitment will allow us all to benefit
  • OPEC+ aims to prove it will adhere to agreements

  Later on, we heard rumours that OPEC+ ministers are said to have agreed to a deal to curb production further by 50k barrels/day.

The US Session

• Canadian Employment Report – The employment report from Canada was released earlier today as well. Unemployment rate was expected to remain unchanged at 5.5%, but it jumped higher to 5.9%. Net change in employment for November came in at -71.2 K versus +10K estimated, which means that jobs have declined. Full-time employment change -32.8K versus 15K estimated. Part-time employment change -38.4K versus +10K estimated. Hourly wage rate ticked lower to 4.4% against 4.5% estimated. Participation rate also ticked lower to 65.6%, against 65.7% estimated, which means that if it remained unchanged, unemployment would have increased to 6%.
  
• US Employment Report – The employment report from the US has been released. Unemployment ticked lower to 5.5% against remaining at 5.6% expected. Change in nonfarm payrolls (new jobs) came higher at 266K beating estimates of 180K. Change in private payroll also came in higher at 254K versus 178K estimated. Manufacturing payrolls came at 54K versus 40K estimated. Labour force participation rate also ticked lower to 63.2% from 63.3% last month, which seems to be the reason for the decline in the unemployment rate.
• US Earnings Report – Average hourly earnings for November missed expectations, coming in at MoM 0.2% versus 0.3% estimated, but October was revised higher to 0.4% from 0.2% previously. Average hourly earnings YoY ticked higher at 3.1% versus 3.0% estimated.
• US UoM Consumer Sentiment – US Prelim UoM Consumer Sentiment report was released just a while ago. It was expected to improve slightly to 97.0 points, from 96.8 in November, which was revised higher int he second revision, from 95.7 points. But, it came in much better, jumping to 99.2 points. Wholesale inventories came at +0.1% versus 0.2% estimates. Wholesale sales posted a 0.7% decline versus -0.1% last month, which was was revised down from 0.0%. Current conditions increased to 115.2 points versus 112.8 estimated. Up from 111.6 last month. Expectations also increased to 88.9 points against 87.5 estimated, up from 87.3 last month. One year inflation expectations falls to 2.4% from 2.5%, 5 – 10 year inflation expectations falls to 2.3% from 2.5%.

Trades in Sight

Bullish NZD/USD Again

• The trend has ben bullish for more than 2 months
• The pullback lower is complete
• The 50 SMA is providing support again

The 50 SMA is scaring sellers again today

NZD/USD made a bullish reversal at the beginning of October, which looked just like another retrace higher before sellers pushed further below. But, sellers didn’t come back and we haven’t seen them since then. We have seen several pullbacks lower, but buyers have come back and have kept things in control.

The sentiment has improved for risk assets, as we approach the final stage of the Phase One deal between US and China. There have been events and comments which have taken this deal back and forth, such as Donald trump’s comments yesterday that he might postpone the deal until Chinese elections are over, responding to China targeting Trump’s electorate with retaliatory targets.

But, today we heard form Bloomberg that the deal might be signed off on December 15, despite the heated rhetoric, which calmed the nerves. Donald Trump also helped the sentiment when he said a while ago that talks with China are going very well.

NZD/USD had retraced lower during the Asian session, but  the 50 SMA (yellow) provided solid support on the H1 chart. The price bounced off that moving average as the sentiment improved after Trump’s comments at the NATO summit. So, this pair is pretty bullish now and we will look to open a buy signal on another pullback lower, to the 50 SMA.

In Conclusion

The sentiment has been pretty negative in the last two days, but it has improved in the last few sessions after positive comments on trade from Trump and China, despite geopolitical issues. Although, the positive figures from the US have improved the sentiment further in the afternoon.