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Friday, 6 Jun 2008
Nonfarm Employment Change on Tap
The Greenback experienced a mixed day in the trading market, seeing early day gains against major currencies like the JPY and CHF, and losses against the EUR and GBP. The oft traded EUR/USD cross saw a 200+ pip gain yesterday, on the heels of an apparent change in the outlook of Euro interest rates as well as fears over today's upcoming Non Farm Payroll figures from the US.
Yesterday was a relatively quiet day on the US economic calendar, as Unemployment Claims headlined the Natural Gas Storage and a speech by Philadelphia Fed President Plosser. Unemployment Claims were down by 18,000 from last week to 357K, but speculation over the failing housing markets as well as concerns over a possible 100K drop in Non Farm Payrolls, sent the dollar on a bearish run, most notably against the EUR. Reports of nearly 1 million homes foreclosing in the US have sent a chilling reality to many investors that the US is still ripe with economic issues.
Remarkably the USD had hit a 4 week high in the early hours of trading on Thursday, dipping below 1.54 support levels, before rocketing back over 1.56 towards the evening GMT. The turn around happened in large part to hints given by European Central Bank (ECB) President Jean-Claude Trichet, that the ECB would raise interest rates in June or July.
Looking ahead to today, the USD will be in the forefront of the news, as we expect a batch of significant market making news. Unemployment Rate, Average Hourly Earnings, a speech by Fed Governor Kroszner, Wholesale Inventories and Consumer Credit are all on tap and will be highlighted by the 12:30 GMT release of the Nonfarm Payrolls. The all important employment figure is forecasted to drop by anywhere between 30K and 80K more than last months fall of 20K. A drop in payroll figures this month will mark the 5th consecutive month that NFP figures (one of the more important on the US calendar) will fall. History has shown us that the market becomes volatile in and around the time of the NFP release. With the current trend of the USD against the EUR, expect to see the EUR/USD cross continue its bullishness. It is likely that the USD will see bearishness throughout the market on Friday against the rest of its major rivals.
The EUR was at the headline of the news day yesterday, as it saw steady gains versus a majority of its currency rivals. The bullishness from the 15-Nation currency was brought about by a speech by ECB President Jean-Claude Trichet, where he stated the intention of the ECB to raise interest rates for the EUR. The idea of a EUR rate hike has been swirling around the rumor mill for sometime, however the stoic hawkishness of the ECB and its upper management regarding Euro-Zone (EZ) monetary policy has dulled any real chance of such a hike happening, until now. Trichet touched upon the "heightened alertness" of the ECB regarding inflationary risks in the EU, as he hinted at a rate hike in the coming months.
The news sent the EUR booming through the market, as it made substantial runs versus its major rivals, including a 200 point swing versus the dollar. Accompanying the ECB Press Conference on yesterdays EZ news calendar, was German Factory Orders, which came back with less than favorable numbers dropping nearly 2% in the month of April.
On tap today from the EZ, we will see French Government Budget Balance, French Trade Balance and German Industrial Production numbers. The results are not expected to change the outlook of the bullish EUR, as most of the days news will come from the US.
Today's market outlook has all the makings for a high liquidity, high volatility day as investors look to capitalize on extended trends.
Yesterday the JPY saw falling trends against most of its major counterparts. The USD\JPY began the trading day at the rate of 105.26, went up to 106.12, and finished the day at 105.96. The JPY also saw bearish trends against the EUR and the GBP.
The JPY's downfall was predominantly observed as a result of a batch of positive data published from the U.S and the Euro-Zone, as opposed to the Japanese economy who failed to deliver any significant data over the last few days.
Today, no data releases are scheduled for the JPY, which therefore turns U.S news to be even more relevant. Traders are especially advised to pay attention to the U.S Employment Change surveys that should be the most influential data release today.
The daily Slow Stochastic is confirming that the bearish momentum of the pair which was very strong is now over. There is a strong bullish cross and the RSI is confirming the bullish notion. Going long appears to be preferable.
The cable is still traded within the bearish channel on the daily chart and is now floating with moderate bullish momentum. There is a cross on the Slow Stochastic which indicates a possible test of the upper level of the channel. It might be smart to go long with very tight stops and wait for the bullish breach.
The pair has breached the key resistance level of 105.50, and it appears that the bullish momentum is very strong. All oscillators are supporting the bullish notion, and it might be preferable to establish a long run buy position as the bullish potential is quite high.
Although the pair is showing a violent and choppy session on many occasions, the daily chart is still floating on very neutral territory with no distinct price direction. The 4 hour chart is slightly hinting on a bullish direction yet it is advised to wait for a strong signal and swing in.
The Wild Card
After a very long period that oil was soaring on a very consistent basis, there seem to be a bearish breach though the daily bullish channel which indicates a possible bearish corrective move. Forex traders have a good shot at what might be a strong bearish trend and need to be protected with tight stops to maximize the position's potential.
|01:00||NZD||GDT Price Index||-1.3%||-||-|
|01:00||USD||Total Vehicle Sales||17.8M||17.2M||-|
|01:30||AUD||AIG Manufacturing Index||52.3||-||-|
|01:50||JPY||Tankan Manufacturing Index||12||12||-|
|01:50||JPY||Tankan Non-Manufacturing Index||19||23||-|
|03:35||JPY||Final Manufacturing PMI||49.9||49.9||-|
|09:15||EUR||Spanish Manufacturing PMI||55.8||55.6||-|
|09:45||EUR||Italian Manufacturing PMI||54.8||55.2||-|
|09:50||EUR||French Manufacturing PMI (p)||50.5||50.5||-|
|09:55||USD||German Manufacturing PMI||51.9||51.9||-|
|10:00||EUR||Final Manufacturing PMI||52.5||52.5|
|11:30||GBP||BoE Financial Stability Report||-||-||-|
|13:30||USD||Challenger Job Cuts||y/y||-22.5%||-||-|
|14:15||USD||ADP Non-Farm Employment Change||201K||212K||-|
|15:45||USD||Final Manufacturing PMI||53.4||53.4||-|