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Friday, 7 May 2010
Impending Non-Farm Report Could Lead to More EUR Losses
With the Euro already recording fresh 14-month lows against the U.S. Dollar on Thursday, the single currency may see a significantly larger price drop following the U.S. Non-Farm Payrolls report. Set to be released at 12:30 GMT, the report is forecasted to show an increase in the American employment figure. This will likely weigh heavily on the Euro.
USD - Non-Farm Payrolls Could Lead to Big Gains for the Greenback
While the Dollar was able to capitalize on the turmoil in Greece and make huge gains on the Euro, it tumbled against the Japanese Yen in trading yesterday. In the last 24 hours, USD/JPY has fallen over 200 pips, and the pair is currently trading around 91.75. Analysts largely attribute the drop to a reaffirmation of the Yen as a safety net compared to the more volatile currencies.
Still, the Dollar has been able to largely maintain its safe-haven status, and as such has gained versus most of its main currency rivals. The GBP/USD has fallen well over 200 pips since this time yesterday. The AUD/USD has also recorded a 200 pip loss in the same amount of time.
Today, traders will want to pay careful attention to the Non-Farm Payrolls Report, set to be released at 12:30 GMT. Analysts are forecasting a jump in the U.S. employment number, which if true, could lead to further gains for the greenback. That being said, traders should note that the opposite effect could also occur. Should the Non-Farm report come in above expectations, investor confidence in the global economic recovery could be boosted. In this case, there could be a return to risk taking, which would lead to a drop for the Dollar.
EUR - Euro Continues to Fall With No End in Sight
Turmoil throughout Greece has weighed heavily on the Euro over the last few days. With violence recorded throughout Greece, there is now a very real fear that fiscal instability could spread to other European currencies. The most glaring example of the single currencies troubles is illustrated by EUR/USD, which is currently trading at fresh 14-month lows. The last 24-hours alone have seen the pair drop almost 200 pips. In addition, EUR/JPY has fallen from 120.55 to its current level of 116.50 in the same amount of time.
Today, traders will want to pay attention to the market reaction to the U.S. Non-Farm Payrolls report, set to be released at 12:30 GMT. Some analysts are forecasting a return to risk taking should the report come in above expectations. While this could potentially happen, most are skeptical that this would translate into serious gains for the Euro. Best case scenario, a return to risk sentiment would mean that Dollar and Yen gains would be slowed down against the single currency.
JPY - Yen Makes Big Gains as Safe Haven Currency
Investor fears that the Greek deficit crisis could spread to other countries within the Euro-zone led. This led to big gains for the Japanese currency in trading yesterday. In addition to the USD/JPY, which has fallen some 200 pips in the last 24 hours, the Yen has also recorded gains on the British Pound and Swiss Franc.
Traders can expect the Yen to remain at its current high levels as long as the Greek crisis remains in the headlines. That being said, the Japanese currency may take some losses today against the greenback, depending on the result of the Non-Farm Payrolls report. A positive figure, say around 200K, would likely lead to solid gains for the Dollar against the Yen.
OIL - Spot Crude Plummets on Market Turmoil
Concerns that the Greek deficit crisis will soon spread to other European countries has sent the price of crude oil spiraling down in the recent trading sessions. The price of crude has experienced its largest weekly drop since January 2009, largely due to what is happening in Greece, as well as the consistently rising level of U.S. inventories.
Currently the price of crude is fluctuating around $77.20. Depending on the outcome of today's Non-Farm Payrolls report, that price could drop significantly lower. Traders can assume that a better than expected payrolls figure, will likely lead to a drop in the cost of crude.
Yesterday the pair broke below the major support level of 1.2600. Momentum appears to be trending strongly to the downside as the major moving average lines are pointed sharply lower. Traders may want to target the 1.2450 support level, which is the bottom of the previous bearish trend on the weekly chart.
The pound has fallen sharply but the losses were halted at the support line of 1.4710. The 14-day Relative Strength Index is downward sloping and has dipped into the oversold region. However, traders should look to be short on the pair until the RSI line breaks above the 30 line. The next support level for the pair rests on the daily chart at 1.4585.
The pair has been range trading for a while now, with no specific direction. The daily chart's Slow Stochastic providing us with mix signals. All oscillators on the 4-hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
The pair has shown bullish behavior in the past several days. However, the technical data indicates that this trend may reverse any time soon. For example, the daily chart's Slow Stochastic signals that a bearish reversal is imminent. When the downward breach occurs, going short with tight stops appears to be a preferable strategy.
The Wild Card
Crude oil prices are once again dropping and the commodity is currently traded around $77.35 per barrel. And now, the 4-hour chart's RSI is giving bullish signals, indicating that crude oil prices might go up. This might give forex traders a great opportunity to enter a very popular trend.
|09:30||GBP||Consumer Inflation Expectations||3.6%||*||-|
|11:00||EUR||German Industrial Production||m/m||-0.6%||0.7%||-|
|13:30||USD||Non-Farm Employment Change||113K||151K||-|
|13:30||USD||Average Hourly Earnings||m/m||0.2%||0.2%||-|
|17:00||USD||FOMC Member Dudley Speaks||*||*||*|