As the US dollar finished last year, so too did it begin the New Year, and after extending its losses, the bears have paused. Technical factors had been stretched, but it appears to have been old-fashioned macroeconomic considerations to have helped the dollar to move off the mat. 

Quickly summarized, these considerations are a larger than expected Australian trade deficit, slippage in Japan’s service sector PMI, a larger than expected drop in the UK’s BRC price index, and the lack of improvement in the flash eurozone December core CPI. The US dollar is firmer against all the major currencies. That said, it is more likely sideways in its trough than a bounce and is wholly unimpressive for bull and bear alike.  

To signal something of importance, we suspect the euro would need to finish the week below $1.20 and sterling below $1.35. The dollar held support near JPY112 at the start of the week and has steadily moved higher. It has now approached a downtrend line drawn off the high in early November near JPY114.75 and the high from H2 December near JPY113.65. It is found today around JPY113.30. 

The employment reports for the US and Canada are the last points of interest ahead of the weekend. Canada. Canada jobs growth has been impressive. It has averaged 41.6k jobs a month over the last three-months, compared with the average for 2016 of 19k and the 2017 average through November of 31k. A subdued report is expected. The Bloomberg survey median of 2k would be the smallest increase since November 2016. Separately, Canada will also report its merchandise trade balance (November) at the same time as the employment report. The Ivey PMI is reported ninety minutes later.  

The US has created more than 200k jobs in three of the past four months through November. Part of the rise in October and November were related to the storm-induced problems in September when the world’s largest economy created 38k net new jobs. The three-month average of 170k matches the year-to-date average of 174k. Economists are still looking for 180k-200k. There are few inputs for the report and none point to any deterioration.