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Monday, 6 Dec 2010
Disappointing Non-Farm Payrolls Data Boosts Yen and Commodities; Dollar Plunges
Last week's session ended with a rather disappointing U.S. Non-Farm Payrolls data as payrolls increased by merely 43,000 in November. As a result, the Japanese yen, and commodities such as gold and crude oil, have rallied. The U.S. dollar on the other hand has tumbled against all the major currencies.
USD - Dollar Closes Last Week with a Bearish Trend
The U.S. dollar fell last week against most of its major counterparts. The dollar began last week's trading session with a rising trend, yet by Tuesday the trend has broadly reversed. As a result, the dollar dropped about 450 pips vs. the euro, and about 200 pips vs. the Japanese yen.
The dollar's bearishness came as a result of disappointing economic data which was released from the U.S., especially regarding the labor market. The most significant data was the Non-Farm Payrolls. The release showed that payrolls increased by 39,000 in November, well below expectations for a 143,000 rise. In addition, the jobless rate rose to 9.8 percent, the highest since April. Another disappointing data was the weekly Unemployment Claims release. The report showed that applications to begin receiving unemployment insurance in the U.S. rose more than forecast last week. Jobless claims increased by 26,000 to 436,000 in the week ended in November 27, failing to reach expectations for 425,000 applications. The unsatisfying employment data have raised concern that the U.S. economic recovery might take longer than expected, and as a result decreased demand for the dollar.
Looking ahead to this week, traders are advised to follow the leading publications from the U.S. economy. Special attention should be given to the weekly Unemployment Claims, the Trade Balance and the Consumer Sentiment reports, as each of these releases is likely to create heavy volatility in the market.
EUR - Euro Corrects Losses before the Weekend
The euro began last week's trading session with sharp drops against most of the major currencies, yet by the weekend managed to erase most losses. The euro gained about 450 pips vs. the U.S. dollar, and the EUR/USD is once again trading around the 1.3400 level. The euro also gained about 150 pips vs. the British pound and about 200 pips against the Japanese yen.
The euro corrected losses last weeks after indications of aggressive bond buying by the European Central Bank (ECB). In addition, ECB President Jean-Claude Trichet asked political leaders in the region to go as far as possible and be as effective as possible, and added that the ECB will keep offering banks as much cash as they want through the first quarter up to three months.
Today, European finance ministers have traveled to Brussels as Belgium argues that the region's bailout fund should be increased to fight contagion from the sovereign crisis. European officials will meet today, and their joint statement is likely to have a large impact on the market.
As for the rest of the week, traders are advised to follow all developments regarding the European debt crisis, as this is likely to remain the most significant issue for the near future. Traders are also advised to follow the leading releases from the German economy, such as the Factory Orders and the Industrial Production reports.
JPY - Yen Gains against Most Major Currency Counterparts
Yen Strengthens Vs. The Majors as Disappointing U.S. Jobs Data Boosts Demand for Safe-Haven Currencies
The Japanese yen ended a volatile trading week with a bullish trend. On Friday, the yen gained about 120 pips vs. the U.S. dollar, closing last week's session with a total 200 pip gain. The yen also saw a 100 pip gain vs. the euro and a 150 pips gain against the British pound.
The yen soared on Friday, as reports showed that the U.S. Unemployment Rate rose to 9.8 percent, failing to remain at 9.6 percent as expected. In addition, U.S. payrolls increased by 39,000 in November, failing to reach expectations for an increase of 143,000 employed people. This has supported concerns that the U.S. economy might not recover as quickly as expected, and as a result boosted demand for safe-haven currencies, such as the Japanese yen.
As for this week, traders are advised to follow the leading economic releases from the Japanese economy, especially the Core Machinery Orders on Tuesday and the Final GDP on Wednesday, as these are likely to have a large impact on the yen.
Oil - Crude Oil Rallies - Trading At A 2-Year High
Crude oil rallied to an annual record high on Friday trading, closing an extremely bullish trading week. Crude oil was traded near $83.00 a barrel as market opened last week, and by Friday crude strengthened to $89.60 a barrel, marking a 25-month high, since October 2008.
Crude oil strengthened on Friday following the U.S. dollar's depreciation. The dollar's fall has boosted demand for dollar-dominated commodities, such as crude oil and gold. Gold rose to $1,415 an ounce, and is trading near an all-time high. The dollar fell on Friday after U.S. employers added fewer jobs than forecast in November, and the unemployment rate has unexpectedly increased.
As for this week, traders are advised to follow the leading economic releases from the U.S. and the euro-zone, as these are likely to have a significant impact on crude oil trading. Traders are also advised to follow the U.S. Crude Oil Inventories report, which is scheduled on Wednesday, as this report tends to have an instant impact on the market.
The EUR/USD pair saw a 400 rise over the past few days, and is currently trading near the 1.3350 level. However, as a bearish cross takes place on the 4-hour chart's Slow Stochastic, a bearish correction might be impending. Going short with tight stops might be the right strategy today.
The cable has managed to correct some of its losses over the past week, and the pair is currently trading near the 1.5740 level. In addition, a bullish cross of the daily chart's MACD suggests that the bullish move might proceed, with potential to reach the 1.5820 level.
The pair has recently peaked at the 84.30 level, yet it saw sharp bullishness ever since. Currently as both the Slow Stochastic and the MACD on the daily chart are providing bearish indications, it seems that another bearish movement might take place today. Going short might be the right choice today.
The pair's bullish correction appears to be over, as the USD/CHF has dropped about 300 pips in a couple of days, and is now trading near the 0.9770 level. The pair is currently trading near significant lows, and as all oscillators on the daily chart are pointing down, the pair might reach as low as the 0.9680 level.
The Wild Card
Gold rallied throughout all last week's trading session, especially on Friday, and is currently trading near the $1,415 level, testing an all-time high of $1,424 an ounce. And now, as both the MACD and the RSI on the daily chart are pointing up, it seems that gold might reach a new record high today. This might be a great opportunity for forex traders to join a very popular trend.
|13:30||CAD||NZD Core Retail Sales||m/m||1.0%||0.6%||0.6%|
|14:45||USD||Flash Manufacturing PMI||55.5||56.2||-|
|15:00||USD||New Home Sales||440K||455K||-|
|15:30||USD||Crude Oil Inventories||10.0M||2.6M||-|
|22:00||NZD||Official Cash Rate||2.75%||3.00%||-|
|22:00||NZD||RBNZ Rate Statement||*||*||*|
|01:00||EUR||Spanish 10-y Bond Auction||3.29|2.1||*||-|
|09:00||EUR||German Ifo Business Climate||110.7||110.5||-|
|10:00||EUR||ECB President Draghi Speaks||*||*||*|
|11:00||GBP||CBI Realized Sales||13||18||-|