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Wednesday, 6 Oct 2010
ADP Non-Farm Employment Change on Tap
Today's non-farm data from Automatic Data Processing Inc. (ADP) should give traders a glance into a sizeable portion of Friday's Non-Farm Payrolls release, since it will be measuring the private sector of the US economy. Expectations are for a rise in employment of approximately 23,000 jobs. If the actual results are in line with forecasts, the USD could pare some of its recent losses. If not, expect the greenback to continue dropping against its rivals.
USD - USD Could Receive Respite from ADP Data Today
After a minor uptick against a few of its rivals, the US dollar appears to have continued its strong downturn against every major currency counterpart. For instance, the EUR/USD, after descending to as low as 1.3624 in early trading yesterday, currently trades just under the 1.3850 price level, marking an 8-month high for the pair. The USD/JPY also persists in testing its 15-year low mark of 83.00 despite efforts from the Bank of Japan (BOJ) to intervene in the forex market and weaken the yen.
Market participants have yet to lower their expectations for a Federal Reserve intervention of the forex market in the shape of quantitative easing. The greenback has been testing long-term low points against many of its currency rivals, and a large portion of data, whether positive or negative, seems to have the identical effect of weakening the buck.
This has done much to bolster the notion of a Fed intervention, but the actual planning for further quantitative easing may first require Friday' non-farm data, which could explain the delay.
Today's non-farm data from Automatic Data Processing Inc. (ADP) should give traders a glance into a sizeable portion of Friday's release, since it will be measuring the private sector of the US economy. Expectations are for a rise in employment of approximately 23,000 jobs. If the actual results are in line with forecasts, the USD could pare some of its recent losses. If not, expect the greenback to continue dropping against its rivals.
EUR - EUR Climbs to 8-Month High vs. USD; 7-Month High vs. CAD
Despite the euro's fundamental weakness over the past year, the past few days have seen strongly resurgent growth for the 16-nation single currency. The EUR/USD has recently touched an 8-month high mark just under 1.3850; the EUR/JPY and EUR/GBP are both at 5-month highs, and still climbing; and the EUR/CAD ascended to a 7-month high to currently trade at 1.4060.
Boosts to JPY and USD liquidity, combined with monetary policies from both countries, has helped increase the flow of investment towards riskier assets, such as stocks and higher yielding currencies. The euro has been a primary beneficiary of this investment migration regardless of many of its fundamental weaknesses.
The euro zone continues to show weakness in its banking sector and sovereign debt coverage, but its appeal to investors looking to escape the conventional safe-havens and enter new markets has helped drive its currency to recent heights. If today's German Factory Orders report comes out as expected with 0.9% growth, the EUR will likely remain bullish against most of its counterparts.
JPY - BOJ Lowers Interest Rates; USD/JPY Still Falling
The surprising move by the Bank of Japan (BOJ) yesterday to lower interest rates from their record low of 0.10% has done little to support the JPY. In fact, the island currency persists in rising against a number of its primary counterparts. The USD/JPY is testing the BOJ's intervention price level of 83.00, while the GBP/JPY also remains in a downtrend with a current price of 132.33.
Expectations for the moment seem to suggest that further BOJ intervention is on the way, but the market awaits Friday's Non-Farm Payroll (NFP) data from the United States. Central banks may therefore be hesitant to make any serious moves on monetary policy until the market absorbs the reaction from this week's interest rates and employment data from the world's largest economies. It seems fair to suggest that most of these major currencies will not move too sharply in the next few days until Friday's NFP release.
Crude Oil - Oil Prices Climb above $82 a Barrel
The price of crude oil has climbed back to the high mark of two months ago with a current market value around $82.60 a barrel. The price broke the significant barrier of $80 a barrel as the USD plummeted on increased risk taking. Currency interventions in Japan and the threat of further quantitative easing by the Federal Reserve, have both pushed traders into riskier assets and out of those two traditional safe havens.
The resulting sell-off in US dollars has pushed the price of commodities like crude oil and gold to recent highs. However, it's not only the descending USD that has crude prices higher. A number of reports have shown that the industrial and manufacturing sectors of some of the larger economies have begun to pick up steam and add fundamental support to oil prices. This growth may also be having an impact on recent risk taking in the market since investors are perhaps feeling more confident about investment growth in those regions experiencing an expansion.
The price of this pair appears to have just entered the over-bought territory on the weekly chart's RSI, suggesting long-term downward pressure may begin to build over the next few days. The daily chart's RSI has the price descending down within the over-bought region as well, highlighting this growing momentum in downward pressure. The overall trend remains up for this pair, but it appears as if counterbalancing force is beginning to be applied and traders may wish to place their stop orders a bit closer as a result.
The indicators on this pair's MACD are unanimously forming bearish crosses on the daily and weekly periods. With the price floating in the over-bought region on the daily chart's RSI, these indicators together suggest that a downward move may be imminent. Going short with tight stops could be a wise move today.
The long-term downtrend on this pair appears to be continuing, with the price approaching its recent low mark of 83.00. Technical indicators seem to suggest an upward correction could be building. The price floats in the over-sold region of the daily and weekly RSI, there is a fresh bullish cross on the daily Stochastic (slow) and there appears to be an imminent bullish cross on the weekly MACD. Going long on this pair appears to be worth considering throughout the remainder of this week.
This downward movement of this pair for the past few months has pushed almost every indicator into the over-sold region. Bullish crosses have either formed, or are forming in the Stochastic (slow) and MACD of the daily and weekly charts. The price also appears to have turned into an upward direction from within the over-sold region of the daily and weekly RSI. An upward correction may be pending, but traders should enter long positions with caution due to the long-term downtrend of this pair.
The Wild Card
This pair's upward movement has pushed the price to its highest resistance level since July 2008. By reaching this significant psychological barrier it has caused almost every technical indicator to show an impending correction. The daily and weekly MACD both show impending bearish crosses, as does the weekly Stochastic (slow). The price also floats in the over-bought region of the weekly RSI, which suggests impending downward movement. Forex traders can take advantage of this information by calling the reversal on this pair and going short to ride the wave for significant profit.
|10:00||EUR||Italian Monthly Unemployment Rate||12.3%||12.4%||12.6%|
|11:00||EUR||CPI Flash Estimate||y/y||0.3%||0.4%||0.4%|
|11:00||EUR||Italian Prelim CPI||m/m||-0.3%||-0.1%||0.1%|
|13:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|13:30||USD||Employment Cost Index||m/m||0.7%||0.6%||-|
|14:55||USD||Revised UoM Consumer Sentiment||86.4||86.4||-|
|14:55||USD||Revised UoM Inflation Expectations||2.8%||-||-|