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Currency markets are once again in the spotlight, with volatile swings across the majors as traders gear up for Mario Draghi’s press conference and tomorrow’s employment reports out of US and Canada.   Equities are trapped in a holding pattern waiting to see if Draghi will follow in the footsteps of the Bank of Japan and outline a more aggressive policy stance towards easing, though the European Central Bank did leave their benchmark interest rates unchanged at the conclusion of their meeting today.   The Japanese Yen has been a particular hot topic of late, a favorite funding currency for traders looking to sell the currency and use the proceeds to generate higher returns elsewhere.   The selling pressure on the Yen drove USDJPY to multiyear highs above 115, yet the physiological level was enough for traders to cull some of their long positions and take profit on the sharp rise since last week’s BoJ announcement.   The drop in USDJPY was actually preceded by profit taking in the Nikkei, which did a prompt U-turn from session highs to drop 1.8% and finish the trading session lower by 0.9%, while USDJPY has settled back into the mid-1.14s.

The Aussie has managed to find a foothold to bring it back to the 0.86 level against the greenback after yesterday’s disastrous sell-off, aided by a better than expected employment report that showed the economy created 24.1k jobs over the month of October.   The confirmation of the unemployment rate being revised higher to 6.2% took some of the shine away from the headline figure, but the overall report was encouraging given the fact full time employment saw an increase of 33.4k new jobs.   Though AUDUSD did hit a new cycle low overnight, the pair is currently positive on the session, with some of the weaker bears lightening up their positions before tonight’s RBA minutes and tomorrow’s Non-Farm Payrolls report.

The European session has been quiet as participants wait with baited breath for Mario Draghi’s press conference to start, though the Euro has seen some buying pressure ahead of the presser and after the European Central Bank left their benchmark interest rates unchanged.   The Euro strength didn’t last long however, as a combination of positive American economic data and one of Draghi’s first comments that there is unanimous consent on the ECB to do more if necessary, sent the Euro spiraling sharply lower.   The Euro has dropped a swift 100pts after Draghi’s initial comments lessen concerns there is tension within the ranks of the ECB’s Governing Council, though we will likely see some continued volatility as Draghi fields questions during the Q&A period.

Heading into the North American open, oil is giving back some of yesterday’s gains that materialized after the report of a pipeline explosion in Saudi Arabia caused a scramble to secure speculative supply.   Front-month WTI is slipping back towards the $78/barrel level, which has kept the pressure on the Loonie overnight, with USDCAD edging back north of the 1.14 handle.  Building permits for Canadian economy over the month of September increased by more than forecast coming in at a 12.7% clip, though that is less than half of the drawdown we saw during the previous month.   The stronger the forecast building permits number has done little to turn the tide for the Loonie, as jobless claims for the American economy fell by 10k last week to come in below the median analyst estimate, bringing the 4-week moving average to only 279k.   The strong jobless claim number has boosted the greenback across the board as participants ratchet up expectations for a strong American NFP tomorrow, which has the DXY back in the green against most of the major currency pairs.   Volatility is likely to continue as Draghi’s press conference continues and influences the direction of EURUSD, especially ahead of tomorrow’s important jobs numbers.

Further reading:

Draghi Defies Discontent – EUR/USD dips below 1.24

ECB Press Conference Live Video Coverage – Draghi drowns euro