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Friday, 6 Nov 2009
Forex Market Awaits Non-Farm Employment Change Figures
Today, traders should pay close attention to the release of the U.S. Non-Farm Employment Change report. This indicator always produces extreme market volatility in the major currency pairs. Traders may find good opportunities to enter the market following this vital announcement at 13:30 GMT.
USD - Non-Farm Employment Change on Tap
The Dollar was little changed against most of its major counterparts during yesterday's trading session, a day ahead of a key government jobs report that will shed light on the health of the U.S. economy. By yesterday's close, the USD fell slightly against the EUR, pushing the oft-traded currency pair to 1.4873. The Dollar experienced similar behavior against the GBP and closed at 1.6604. The USD did see some bullishness as well as it gained over 50 points against the JPY and closed at 90.67.
The greenback fell in the prior session after the Federal Reserve kept Interest Rates at record lows and signaled they were likely to stay there for some time to come. It also lost more ground on Thursday after European Central Bank President Jean-Claude Trichet sounded an optimistic note about a 2010 recovery and hinted at a slow-motion exit strategy for some emergency stimulus measures.
Another leading indicator released yesterday was U.S. Unemployment Claims. This number handedly beat last week's result, but failed to provide strength to the Dollar as investors await key data to be released today, in order to implement their trading strategies.
Today's Non- Farm Employment Change release is expected to have a strong impact on the U.S currency. Any result could be a surprise, and the Dollar could go either way as a result. In any case, traders are unsure how the market will react to today's data. A weak report could feed risk aversion, boost Treasuries and actually aid the U.S Dollar. Then again, a better than expected result might be seen as a sign of relative U.S. economic strength, and lift the Dollar. Or it could also encourage risk-taking and aid commodities and higher-yielding currencies at the Dollar's expense.
EUR - EUR Rises on ECB President Trichet's Comments
The EUR experienced a bullish trading session yesterday, as it appreciated against most of its major currency pairs. The 16-nation currency extended gains versus the Japanese Yen during yesterday trading session, to trade above 1.3495 amid a broad sell-off in the JPY. The European currency finished around 100 pips higher against the CHF to finish yesterday's trading session at the 151.15 level.
The EUR got a boost after European Central Bank President Jean-Claude Trichet presented an optimistic tone on Euro-Zone growth, saying the economy will recover next year.
Both the ECB and the Bank of England left Interest Rates unchanged on Thursday. The decisions came after the U.S. Federal Reserve on Wednesday held borrowing costs near zero percent, and kept its commitment to low rates for an extended period.
Looking ahead to today, the most important financial indicator scheduled to be released from Europe is the German Factory Orders. Analysts are forecasting this figure to slightly decrease from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may continue to bolster the EUR in the short-term.
JPY - JPY Free Fall Continues
The Japanese Yen saw a bearish trading session yesterday, losing ground against most of its currency crosses. The JPY fell against the EUR and closed at 1.3495, while the GBP/JPY cross rose to around 155.50.
The JPY's trends will be affected by the rallies of its primary currency pairs today. It seems that the USD and EUR are expected to continue a volatile trading session today, especially against the Japanese currency. Traders should keep a close look on the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY's movement today, especially the Non- Farm Employment Change at 13:30 GMT. It is also advisable for traders to follow any unexpected comments coming from key Japanese governmental figures, as this is also likely to lead to further JPY volatility.
Crude Oil - Crude Oil Stabilizes Near $80 a Barrel
Oil fell to below $80 a barrel on Thursday, as doubts about a recovery in Oil demand outweighed positive economic signals. Oil dropped to an intra-day low of $79.30 a barrel before rebounding to the settlement level of 79.90, which was little changed compared with the previous session.
As for today, traders should pay close attention to the U.S Non- Farm Employment Change report, as it has tended to have a large impact on Crude Oil's prices recently, especially for the short-term.
The pair is currently going through a 2-day winning streak, and it currently stands at the 1.4875 level. The RSI of the 4-hour chart shows the cross floating in the overbought territory, signaling that a downward correction is imminent. Going short with tight stops may turn out to pay off today.
The GBP/USD cross has gone up by about 250 pips since Tuesday and this trend may continue, as the pair continues to rise higher on the chart 1-hour Bollinger bands. However, the MACD of the 4-hpour chart indicates that the cross has run out of steam, and that a bearish correction is imminent. Going short at an early stage seems to be the right choice for Friday's trading.
The technical indicators for this pair seem to be showing misleading signals. On the one hand, the RSI of the weekly chart shows the pair sitting in the oversold territory. On the other hand, the recent cross above the 80 mark on the Slow Stochastic of the 4-hour chart indicates that a bearish correction may be imminent. Entering the pair when the signals are clearer seems to be the right choice today.
The USD/CHF cross has been range trading between the 1.0125 and 1.0265 levels over the past week. The MACD of the weekly mark supports a downward move for today. Going short with tight stops could bring you big returns today, as this week's trading comes to and end.
The Wild Card
Crude Oil has gone dramatically higher in the past week, and currently stands at the $80.12 mark. The recent bearish cross on the Slow Stochastic of the weekly chart indicates that a bearish correction is imminent today. Entering the pair when the downward breach occurs may turn out to pay off for forex traders today.
|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%||-||-|