Thursday, 7 Oct 2010

Wild Day of FX Trading Prior to Non-Farm Payrolls Report

Moves in the FX market were volatile in a day that had multiple decisions by European central banks and better than expected weekly jobs data. Commodities were hit hard with both gold and spot crude oil falling sharply.

While the decisions by the central banks came in as expected, US weekly unemployment claims were stronger than forecasted. New jobless claims came in at 445K on expectations of 454K.

With a glut of news events on the calendar, the major currencies traded in large ranges. Some of the big movers today were the EUR/USD which moved above the psychological resistance level of 1.40, the USD/JPY which pushed to a new 15-year low, and the USD/CHF that recorded a new all-time low.

The EUR/USD pushed as high as 1.4028 only to lose those gains and fall as low as 1.3856. The pair has come back and is currently trading at its opening day price. This could be a bearish signal for the uptrend. If the price closes at its currently level, the daily candlestick will form a longed legged doji which may signal a pause in the uptrend or at the worst a reversal. Support for the EUR/USD will be found at the March high of 1.3820. Resistance should be located at the December 2009 lows near 1.4210.

Commodities were hit hard despite the positive economic data. Spot crude oil prices dropped sharply from a five-month high following a stronger dollar versus the euro. After the price moved as high as $84.41, profit taking occurred, sending the price tumbling. Spot gold prices were also down after setting a new all-time high of $1364.

Tomorrow all eyes will be on the US Non-Farm Jobs report set to be released at 12:30 GMT.