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Friday, 5 Sep 2008
Nonfarm Payrolls On Tap
As for today, at least for one trading session, everything is prone to change. Today is the first Friday of the month, and as such, the U.S Non-Farm Employment Change will be announced at 12:30 GMT. Unlike yesterday's data, this indicator will not be overlooked by investors.
USD - USD Appreciates in Expectation of Today's Announcement.
Yesterday, the greenback saw over 300 pips worth of gain against the EUR, as the cross dropped from a 1.4522 level at the beginning of the trading day, down to 1.4211 - making an 11 month low. The USD also continued its appreciation vs. the GBP; however this rally did not affect the USD\JPY pair, as the USD lost about 200 pips against the JPY.
The USD rose during yesterday's session despite some concerning data that was published from the U.S. economy. The Automatic Data Processing has announced a 33K drop forecast for the Non-Farm Employment Change. However, it appears that the market has limited its reaction to the survey as it has failed to accurately estimate the actual figures over the past few months. The Revised Non-Farm Productivity and the Unemployment Claims also pointed out that the U.S economy is far from fully recovering, as the unemployed individuals in the U.S. are consistently growing, currently measured at 444K. The only good news for the USD was the better- than- forecasted result on the Non-Manufacturing Purchasing Manager's Index that showed that the non-manufacturing industry has slightly expanded during July.
In conclusion, two factors have joined together to strongly support the USD. The first one was the poor Euro-Zone data, which is continuing to prove that the most sustained global concerns are now coming from the European nations, and not from the U.S. The second factor is what is known as the "herd effect". The current USD bullish trend appears to be so enduring that investors are seeing potential for unlimited profits and are so anxious to join the fest that they are becoming almost oblivious to the economic indicators. In this turn of events, only a major combination of unfortunate data from the U.S., along with a series of positive signals from the Euro-Zone, could initiate a long-lasting reversal for the EUR/USD pair.
As for today, at least for one trading session, everything is prone to change. Today is the first Friday of the month, and as such, the U.S Non-Farm Employment Change will be announced at 12:30 GMT. Unlike yesterday's data, this indicator will not be overlooked by investors. This is because it is a leading indicator of consumer spending, which accounts for a majority of overall economic activity, and also because it is published much earlier than the other leading indicators, and as so, investors often plan their weekly and monthly strategies based on this survey's result. This is why an immediate reaction to this survey's figures will take place. Analysts have forecasted a 73K drop in the number of employed people during July, and such a result is very likely to generate a bearish impact on USD pairs. However, in case of better- than- expected figures, the USD might extend its sharp bullish rally, and in its center, the EUR/USD might drop to levels around 1.4100.
EUR - Will the US Nonfarm Payrolls Figures Help the EUR?
Yesterday, the EUR suffered from falling trends against all the major currencies, including a 300 pips slide against the USD. The EUR/USD is now traded around the 1.4250 level, which reflects an almost 1,800 pips drop that the pair saw during the last five weeks.
It appears that the EUR is nurturing its deterioration in every opportunity it gets as unfortunate data is published on a daily basis from the Euro-Zone. In addition, the European Central Bank (ECB) is adding fuel to the high flames with decreasing growth forecasts for the region.
The German economy, which is considered to be the Euro-Zone's strongest, seems like it has entered a slowing phase, and as a result, is pulling the entire region into recession. Yesterday, the German Factory Orders survey fell by 1.7% in July as opposed to the previous month, continuing a series of negative data from Germany.
Soon after, the ECB announced that it leaves the interest rates intact at 4.25%. However, at the press conference that was held shortly after the interest rates announcement, ECB chiefs have mentioned that the EUR is still effectively overvalued despite its recent fall, boosting the USD against the EUR. Furthermore, the ECB has readjusted its growth expectations for the next year- and- a- half. For the year 2008, the ECB predicts a 1.1% growth rate, and a rate of 1.2% for 2009. Only three months ago the ECB published 1.8% growth rate estimations for 2008, and 1.5% estimations for 2009. All of the above was interpreted by investors as an excellent opportunity to extend their short positions on the EUR, and the result was a sharp drop against all the major currencies.
Looking ahead to today, various economic indicators will be published from the Euro-Zone; the German Industrial Production will be the most affecting indicator. Analysts are expecting a 0.5% drop in June as opposed to May, and another bearish inclination is likely to take place for the EUR. However, the U.S Non-Farm Employment Change will definitely be the most affecting global event today, and traders are well advised to follow its results as it seems to be the only thing that might generate a minor bearish correction for the USD, which would mean a rising trend for the EUR.
JPY - Powerful Upswing for the JPY.
Yesterday the JPY rose against all of its major currency counterparts. The JPY rose over 200 pips against the USD, and over 600 pips against the EUR, as the EUR/JPY saw a 13 month low, reaching beneath the 151.00 level.
It seems that investors were bailing out of more leveraged carry trades, and began borrowing Yen at low rates in order to buy higher yielding currencies and commodities. Moreover, not only did the JPY appreciate against the major currencies such as the EUR and the GBP, it was also the only currency to appreciate against the USD. Analysts also estimate that the Euro-Zone's economic uncertainty has lead investors to seek out for other prospects aside from the EUR. The first choice was of course the USD, which initiated its current bullish trend. Since the U.S. economy is far from being a stabile economy to rely on recently, the JPY has suddenly became a very attractive prospect. Late at night, during early Asian trading, the Japanese Capital Spending was published, demonstrating a 6.5% decrease from the first quarter of the year. This turned a minor bearish correction for the JPY during the night.
Today, the JPY will be absent from the economic calendar, and traders should follow overseas events in order to determine the JPY's direction for today. Special attention should be given to the U.S Non-Farm Employment Change that will be published at 12:30 GMT, and will be today's leading publication which will also affect the Yen's crosses.
OIL - OPEC Scheduled Meeting to Discuss Potential Cuts to Oil Production.
Dodging storms and defying international conflict, oil prices have continued to sink. Prices dropped over a buck last night to hit $107.71 this morning. Market analysts are expecting this price to continue further down this weekend to eventually sag below the $100 mark, in which case OPEC will meet to discuss a cut in production. OPEC, which produces 40% of the global energy supply, has stated that market volatility is still high and they will consider waiting for more stability before making any cuts, but if prices continue to fall, they will do just that.
Another major factor affecting oil prices is the strengthening dollar. As it appreciated even more yesterday, dollar-based commodities witnessed price drops. If the dollar continues its upward swing, the prices of these commodities, given the stagnating economy, may see this as a persisting trend. The impact of today's Non-Farm Employment Change figures on the USD will no doubt have an effect on oil prices, but the decrease in demand for energy and the worldwide economic slowdown will most likely continue their downward push on crude oil's price until reaching a point where producers would intervene with production cuts.
The pair is in a bearish formation and the daily studies are strengthening the notion that the pair's direction is down. The hourly confirm the bearish notion as the 4 Hour RSI has failed to cut the 80 level from the bottom section. It appears that the EUR/USD is heading towards 1.4000
The pair is consolidating at the 1.7590 level after the sharp drop from 1.7900. The momentum is bearish and the next key level will reach a 1.7500 level. If a breach through that level will occur a stronger bearish move will be validated that might take the pair to new lows.
A mild bearish channel is forming On the 4 Hour chart with 104.50 as a support barrier which is going to be tested, probably today. In case of a breach the pair might be in its way to 103.00. Going short might be preferable after the breach through the support level will take place.
The dailies and the 4 hour charts are bullish, so this pair is expected to continue its upward movement. This pair will probably target the 113.00 level and entering a long position on a dip will create a good opportunity for some profit taking.
The Wild Card
It has been nothing but bearish momentum for this commodity in the past 5 days, and this downtrend appears to be continuing at full throttle. forex traders should note that Oil is breaking one support level after another and no halt appears to be in sight. The next target price should be around $100 a barrel.
|06:30||EUR||French Final Non-Farm Payrolls||q/q||-0.1%||-0.1%||-|
|07:00||EUR||German Final CPI||0.2%||0.2%||-|
|15:30||USD||Crude Oil Inventories||-5.6M||-||-|
|18:06||USD||10-y Bond Auction||2.75|2.7||*||-|
|19:00||USD||Federal Budget Balance||-91.6B||-154.6B||-|
|20:00||NZD||Official Cash Rate||2.50%||2.50%||-|
|20:00||NZD||RBNZ Press Conference||*||*||*|
|20:00||NZD||RBNZ Rate Statement||*||*||*|
|20:00||NZD||RBNZ Monetary Policy Statement||*||*||*|
|00:00||AUD||MI Inflation Expectations||1.9%||*||-|