US OUTLOOK/OPINION: Scope For Large Revisions After Tumbling Response Rate
Dec-05 20:01
[The below is taken from the MNI Payrolls Preview - see the full report here]
- The initial response rate of 47% for the October esatblishment survey was disappointing even by recent deteriorating standards, at its lowest since 1991.
- The BLS at the time noted that it was depressed in areas both affected and unaffected by the hurricanes so it can't be easily written off. “A larger influence on the October collection rate for establishment data was the timing and length of the collection period. This period, which can range from 10 to 16 days, lasted 10 days in October and was completed several days before the end of the month.”
- Second response rates have been tracking much higher at above 90%, which would see a huge amount more information than with the first read for October. That leaves scope for large two-month revisions, with attention on whether October's surprisingly soft month was revised away or whether September's initially strong report was further trimmed.
- We believe there’s a net expectation of upward revisions in this week’s report. BNP Paribas for instance run through the sequence of revisions to Sep 2017 payrolls growth after Hurricanes Harvey and Irma: the initial estimate saw national payrolls growth decline -33k, before +18k after the first revision (the report we’ll be getting this week for the Oct 2024 estimate) and +38k in the second release. Note that it was eventually upgraded to a +92k increase shown in the current vintage of data but that’s after benchmark revisions which can take longer to show up.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EURJPY TECHS: Bullish Outlook
Nov-05 20:00
- RES 4: 169.20 High Jul 24
- RES 3: 168.01 High Jul 26
- RES 2: 167.40 61.8% retracement of the Nov 11 - Aug 5 bear leg
- RES 1: 166.69 High Oct 31
- PRICE: 165.93 @ 16:56 GMT Nov 5
- SUP 1: 164.11/163.06 20-and 50-day EMA values
- SUP 2: 161.85/161.01 Low Oct 17 / Low Oct 4
- SUP 3: 158.11 Low Sep 30
- SUP 4: 157.05/155.15 Low Sep 18 / 16
The EURJPY trend set-up is unchanged. A bullish theme remains intact and last week’s fresh cycle high reinforced current conditions. Initial support to watch lies at 164.11, the 20-day EMA. Recent gains suggest scope for a climb towards 167.40, the 61.8% retracement of the Nov 11 - Aug 5 bear leg. Clearance of this level would strengthen a bullish theme and open 168.01, the Jul 26 high.
US TSYS/OVERNIGHT REPO: ON RRP Continues To Fall, But Reserves Still Ample
Nov-05 19:51
Takeup of the NY Fed's Overnight Reverse Repo facility fell to the lowest level today since May 2021 - by $27B to $144.2B. Since October 29, takeup has fallen by over $100B, with levels well off the all-time high of over $2.5T at end-2022.
- The move has largely been unexpected, with most observers appearing to believe there would be an uptick starting from the low-$200B levels seen in mid-October. However, that hasn't materialized.
- It's an interesting time for ON RRP to get drained to this extent, given that the FOMC may be discussing QT policy on Thursday, albeit without any intention of making near-term changes. Overall, reserves + ON RRP (which is considered a fungible substitute for reserves in terms of system liquidity) total $3.4T (per Thursday's Fed weekly balance sheet release plus today's TGA), which is well above levels thought to be scarce (starting somewhere around $3T).
- The pullback in ON RRP takeup coincided closely with the rise in Tsy bill issuance amd rebuild of the Treasuey General Account after the suspension of the debt limit - but that suspension is set to be lifted at the start of 2025, and ON RRP is expected to bounce back at that time.
COMMODITIES: Crude Gains, Gold Consolidates Ahead Of US Election Results
Nov-05 19:51
- WTI continues to trade higher on the day but has pared its earlier gains as the market shifts focus to the US election. It briefly dipped into losses on the day before rebounding.
- WTI Dec 24 is up by 0.9% at $72.1/bbl.
- From a technical perspective, a bearish theme in WTI futures remains intact and the latest recovery, including Monday’s gains, appears to be a correction.
- However, a clear reversal would refocus attention on the key short-term resistance at $77.70, the Oct 8 high. Initial resistance at $72.34, the Oct 24 high, was pierced earlier today.
- Meanwhile, Henry Hub is set for losses today despite fears of disrupted production due to Tropical Storm Raphael. Downside comes from milder weather forecasts and expectations of higher-than-average inventory builds last week.
- US Natgas Dec 24 is down by 3.5% at $2.68/mmbtu.
- Spot gold has edged up by 0.2% to $2,742/oz, as it consolidates below last week’s record high at $2,790.
- The trend condition in gold remains bullish, with sights on the $2,800.0 handle next.
- Copper has extended its gains today, amid Chinese stimulus hopes, with the red metal rising by another 0.6% to $446/lb, taking gains so far this week to more than 2%.
