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Friday, 2 Jul 2010

Markets Await the Release of Non Farm Data

Today's release of the Non Farm Employment Data, which is due to be announced at 12:30 GMT, follows a week of negative economic data which raised concerns that the U.S economic recovery is stagnating. It is expected that payrolls fell by 100K in May, which if true, would likely put further pressure on the USD.

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Economic News

USD - USD Tumbles on Negative Economic Data

The USD fell against its major counterparts today after the release of negative economic data fueled concerns that the U.S economic recovery is slowing. The Institute for Supply Management's manufacturing index fell to 56.2 in June from 59.7 in May, while U.S. pending home sales fell 30%in May. Putting further pressure on the USD was the release of the Unemployment Claims data which showed an increase of 13,000 new people filing for unemployment insurance from last week. This result is especially important ahead of the release of the Non Farm employment data today at 12:30 GMT.

The USD seems to be loosing its safe heaven appeal in light of the poor economic data and stagnate labor market. Concerns about weakness in the U.S economy are proving very negative for the greenback, particularly versus the yen. The dollar dropped 0.9% against the yen to 87.60 yesterday. At one point, the pair touched 86.97, its weakest level since Dec. 2.

EUR - EUR Recovers to above $1.25 Level

The EUR rallied against the USD following a successful Spanish government bond auction. The common currency broke above the $1.25 level, gaining more than 2.25% to reach its highest level in five weeks against the greenback.

The EUR/JPY is currently trading around the 110.15 level, an increase of over 200 pips from last night. The U.K. pound is trading at $1.5183 from $1.4939. The GBP rose after the release of the manufacturing PMI which showed that Britain's manufacturing sector continued to grow at a fast pace in June. The Swedish Krona also rallied yesterday following the decision by Sweden's central bank to hike its key lending rate to 0.5%, up from 0.25%.

Today, the direction the euro takes will likely be based on the U.S. Non Farm Employment data, set to be released at 12:30 GMT. Investors are also advised to follow the release of the euro-zone unemployment rate at 9:00 GMT.

JPY - JPY Soars Versus the USD

The yen gave some ground to the U.S. dollar in early Asian trading today, with the USD gaining 0.5% against the Japanese currency and pushing back above 88.00. USD/JPY had earlier dropped sharply to a 7-month low below 87.00 Thursday. The yen also fell against the EUR as Asian Equity markets rose, boosting demand for riskier assets.

The yen weakened against 11 of its 16 major counterparts. The yen fell to 110.10 per EUR from 109.74 in New York yesterday. It slid to 88.05 per USD from 87.60 yesterday, when it climbed to 86.97, the highest level since Dec. 2.

Markets today are awaiting the release of the U.S Non Farm Data. A worse than expected result will likely benefit the yen as it is perceived as a safe heaven currency and tends to benefit in times of financial uncertainty.

Crude Oil - Crude Falls below $73 a Barrel

Crude oil futures fell 3.5%, sliding to three-week low yesterday. Light, sweet crude for August delivery on the New York Mercantile Exchange settled down $2.68 at $72.95 a barrel, the lowest price since June 8; it was the biggest single day decline since June 4.

Crude Oil fell on concerns of a stalling economic recovery after the release of disappointing U.S. reports on manufacturing, unemployment, home sales and construction spending. It reached a low of $72.05, down 9.2% from Monday's high of $79.38 a barrel.

Demand prospects are diminishing over an apparent slowdown in the Chinese and U.S economic recovery, the 2nd and 1st largest oil consumers respectively. It is likely market sentiment will remain negative without any positive economic news. Investors will be paying close attention to today's U.S. Non Farm unemployment data as it is expected payrolls will drop by 100,000.

Technical News


The Relative Strength Index (RSI) on the 4-hour chart shows this pair trading well into overbought territory, an indication that a downward correction should take place sometime today. This sentiment is supported by the Bollinger Bands on the 2-hour chart. Going short with tight stops may turn out to be the best strategy today.


The Stochastic Slow on the 4-hour chart shows a bearish cross has formed for this pair, indicating a downward correction is likely to take place during the course of the day. This theory is supported by the RSI on the 2-hour chart, which shows the pair in overbought territory. Traders are advised to go short with tight stops today.


The Relative Strength Index on the daily chart indicates that this pair is currently in oversold territory, indicating that upward movement is likely to take place over the course of the day. This conflicts with the Stochastic Slow on the 2-hour chart, which shows a bearish cross forming. Traders may want to take a wait and see approach for this pair today.


The Relative Strength Index (RSI) on the 4-hour chart shows that the pair is in oversold territory, and has been there for some time. The Stochastic Slow on the daily chart is showing a bearish cross has formed, lending support to the theory that an upward correction may take place. Traders are advised to go long with tight stops today.

The Wild Card


After falling more than 3000 pips yesterday, technical indicators are showing that gold may see an upward correction today. The Stochastic Slow on the 4-hour chart shows that a bearish cross has formed, an indication that upward movement could occur. The Relative Strength Index on the 8-hour chart also shows the commodity in oversold territory. Forex traders are advised to go long today.

Current Time: 11/25 23:59 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
USD+ Bank Holiday---1
00:30AUD+ Private Capital Expenditure q/q-4.0%-2.8%-5
09:00EUR+ M3 Money Supply y/y4.9%4.9%-3
09:00EUR+ Private Loans y/y1.1%1.2%-1
12:00EUR+ GfK German Consumer Climate9.49.2-1
13:30CAD+ Corporate Profitsq/q12.9%--1
23:30JPY+ Household Spendingy/y-0.4%0.0%-3
23:30JPY+ Tokyo Core CPI y/y-0.2%-0.1%-3
23:30JPY+ National Core CPI y/y-0.1%-0.1%-1
23:30JPY+ Unemployment Rate3.4%3.4%-1
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