Though flying low on the radar, two third-tier economic releases this morning were stoking support for the dollar and disturbing the quiet expected to blanket the majors until Fridays NFPs hit the wires. The MBA Mortgage Applications for the final week of November and Novembers ADP net employment both printed better than their respective expectations, but traders seemed to discount the data as the overpopulated bears hold strong.
For the EURUSD, a 90 point move in the dollars favor to 1.3255 was set on pace for a deep retracement after the New York releases. The Japanese was filling out the 70 point range put up yesterday between 115.20 and 114.50. Against the pound, the dollar was finally making headway with a 125 point drive to 1.9615 from the Asian session; but a 100 point rebound put the move off kilter. Finally, the USDCHF failed on a double touch at 1.1990 resistance, and a 65 point pull back nearly erased all of the gains one since yesterdays close.
Though Fridays NFP release is still a ways off, the fundamental lines out of the US were not completely cut off. Typically, the MBAs weekly applications report and the still new ADP employment report draw little attention in the sea of economic releases. However, this was not the case this time around. Since the deep slump in the housing market has played a hand in wearing growth down from 5-plus percent to 2.2 percent this past quarter, second and third rung housing market indicators are starting to find their way onto traders screens. The Mortgage Bankers Associations index of housing applications for the week ending December 1st grew 8.1 percent, the most in four weeks. More importantly however, the overall level of the indicator is at its loftiest in ten months thanks to recent easing in housing prices and falling mortgage rates. In the last round of sales reports, price components have reported declines in costs not seen in at least thirty years. Also, the average 30-year fixed-rate mortgage recently slipped below 6 percent for the first time in 14 months. While the lagging sales and price indicators have yet to pull out of the nose dive initiated last year, more up to date applications and mortgage numbers may suggest the steepest tract of the sectors decline may be behind us.
Though the slow deflation of the housing market bubble remains an underlying concern for dollar traders, few will be pulled away from their NFP watch. Since yesterdays strong Challenger survey reported a 23 percent drop in firings in November compared to a year ago, some optimism for national payrolls is starting to find its way back into the market. Todays ADP private employment change for the same month further supports the growth suggested in the Challenger and ISM services surveys. In a move that bulls hope will mimic Friday, the ADP report outpaced expectations with 158,000 additional jobs found. Further more, a testament to the relative forecasting ability of the ADP report, the indicators own 100,000 consensus was the same as the non-farm payroll report. However, the dollar selling that followed the report reveals that the market is still skeptical of the relatively new reports predictive abilities. Though discrepancies between the NFP and ADP reads have moderated in recent months, the sizable divergence in June is still too fresh for traders to forget.
Equities were fairing little better than the dollar Wednesday as the market eased off its advance and took in earnings and forecasts reports. By 16:30 GMT, the tech-heavy NASDAQ Composite Index was leading with a modest 0.15 percent decline to 2,448.81. The Dow was only marginally lower at 12,328.00 while the S&P 500 was nearly stationary at 1,414.94. From the list of active movers this morning, a few big names were moving the markets. Internet search giant Yahoo Inc.s shares were moving lower on the announcement the firm is releasing Chief Operating Office Dan Resensweig and Lloyd Braun in its efforts to guide the company into a more competitive stance against rival Google. Shares of Yahoo were trading 1.9 percent higher on a $0.51 advance to $26.92. In the pharmaceutical sector, Merck shares were off 1.3 percent or $0.60 at $44.41 after confirming its tepid 2006 forecast and offering little better in the fiscal 2007 outlook.
Traders in the treasury market were little swayed by todays fundamental reports. Treasury notes were 7/32nds lower at 101-08 by 16:30 GMT as its yield advanced an inordinate three basis points 4.468. Bonds were also 7/32nds off at 98-19 while yields on the thirty-year instrument were up only a single basis point at 4.587.
