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Friday, 8 Oct 2010
U.S. Non-Farm Payrolls Expected Today at 12:30 GMT
Yesterday's trading was filled with exciting developments; the dollar ended a bearish run against the euro and the British pound on one hand, and reached a 15-year low against the Japanese yen on the other hand. In addition, crude oil saw a very irregular daily loss of over 300 pips. That being said, today's trading promises to be no less exciting, largely due to the U.S. Non-Farm Payrolls release scheduled for 12:30 GMT. This is the most significant indication of the U.S. employment situation, and unusual volatility is often observed following its release.
USD - Dollar Weakens Ahead Of Non-Farm Payrolls
The U.S. dollar fell against most of the major currencies during yesterday's trading session. The dollar's most notable depreciation took place versus the Japanese yen. As a result the USD/JPY pair is now trading at the 82.30 level, near a 15 year low.
The dollar continued its bearish trend against the major currencies today due to speculations that the Federal Reserve will debase the greenback by advancing purchases of government debt to in order to support the economic recovery. Later on the dollar erased some of its losses following better than expected employment data from the U.S. The weekly Unemployment Claims report showed that applications for U.S. unemployment insurance unexpectedly dropped last week to its lowest level in three months. Jobless claims fell to 445,000, beating expectations for 454,000 claims for unemployment benefits. In general it appears that as long as speculations regarding further stimulus from the Fed take place, the dollar has potential to drop even further, especially against the euro and the yen.
As for today, the most exciting trading day of the month is expected as the U.S. Non-Farm Payrolls release is scheduled for 12:30 GMT. This report measures the change in the number of employed people during September. In normal times this report has an unusual effect on the market due to its early release. However, considering the fragile condition of the U.S. labor sector, today's release is likely to have an enhanced impact on the national currency.
EUR - Euro Correcting Gains after EUR/USD Crosses the 1.4000 Barrier
The euro reached an 8-month high against the U.S. dollar during yesterday's trading session. Early in the day, the euro continued its recent bullish run and the EUR/USD pair went as high as the 1.4028 level. However the currency erased most of its gains later on, and the pair is currently trading near the 1.3920 level.
The euro was boosted during early trading following a positive Industrial Production figure from Germany. The report showed that the total value of output produced by manufacturers rose in August by 1.7%, well above expectations for a 0.4% rise.
However, the euro then corrected its trend and erased most of its losses. The currency fell due to speculations that today's U.S. employment report will provide better than expected data. In addition, the general sentiment in the market after the EUR/USD crossed the 1.4000 level was that the euro's rally reached its peak. Investors responded by closing their long positions.
Looking ahead to today, traders are advised to follow the British Producer Price Index release, which is scheduled for 08:30 GMT. Traders should also pay attention at 12:30 GMT when the U.S. Non-Farm Employment Change data will be released. Heavy volatility is likely to influence euro pairs.
JPY - Yen Trades Near 15-Year High against the Dollar
The Japanese yen continued to strengthen against all the major currencies during yesterday's trading session. The yen's rally against the dollar has now taken it near a 15-year high, and the pair is trading around the 82.30 level. The yen's rally also included around a 100 pip gain vs. the euro and British pound.
It appears that investors are betting that despite Japan's desire to devalue the national currency in order aid its export industry, the international criticism following its last intervention will prevent the Japanese government from acting again. In addition, the Japanese Finance Minister Yoshihiko Noda said yesterday that last month's intervention was not intended to signal a long-term campaign to target a specific level. This has added to speculation that the BoJ will not step in again, giving further bullish pressure to the JPY.
As for today, no significant economic releases are expected from the Japanese economy. Traders are advised to follow the major economic publications from the U.S. and euro-zone, especially the Non-Farm Payrolls release, as heavy market volatility is expected.
Crude Oil - Crude Oil Sharply Drops To $81.00 a Barrel
Crude oil saw a sharp drop during yesterday's trading session. Early in the day, crude was trading near $84.50 a barrel, marking a 5-month high. A sudden decrease in value took place early in the afternoon, pulling the commodity as low as the $81.00 level.
Crude fell yesterday after the U.S. dollar rebounded against the euro and the British pound. The dollar erased some of its recent losses following a better than expected weekly unemployment report. In addition, a daily decline in U.S. equities has added to the downward pressure on crude oil. As a result, the commodity erased most of this week's gains.
Looking ahead to today, traders are advised to follow the major economic releases from the U.S, especially the Non-Farm Unemployment data, which is scheduled for 12:30 GMT. This is the most reliable indicator of the U.S. employment condition, and tends to have a significant impact on the market.
After it peaked at the 1.4028 level, the EUR/USD pair promptly corrected its gains, and sharply fell to the1.3856 level. Currently a bullish cross on the Slow Stochastic in the 4-hour chart indicates that the bearish correction is over. Going long might be the preferable choice today.
The pair managed to cross the 1.6000 resistance level yesterday, yet shortly after dropped to the 1.5825 level. At the moment, as the weekly RSI is pointing up, the pair looks to resume its bullish trend, with the potential to reach the 1.6000 level yet again. Traders may want to go long with tight stops today.
The pair reached an astonishing 15-year low yesterday, after falling to the 82.10 level. All the technical indicators on the weekly chart continue to provide bearish signals, suggesting that the pair can still drop further. Going short is still the preferable option.
The pair's bearish channel was broken yesterday after it climbed 150 pips in a single day and reached the 0.9700 level. In addition, a bullish cross on the 4-hour chart's MACD has taken place, indicating that the upward correction has room to grow. Going long with tight stops might be the preferable strategy today.
The Wild Card
Up until yesterday, gold's bullish trend was one of the safest bets in the market. However, after peaking at $1,364 an ounce, gold dropped as low as $1,325. Currently the RSI on the daily chart is pointing down, and about to cross the 70 line. This means that gold has potential to drop further. This might be a good opportunity for forex traders to catch the trend at its beginning. Going short is the recommended choice.
|22:30||AUD||AIG Manufacturing Index||46.9||-||-|
|23:30||AUD||MI Inflation Gauge||m/m||0.0%||-||-|
|01:35||JPY||Final Manufacturing PMI||52.1||52.1||-|
|08:00||EUR||Spanish Unemployment Change||-64.4K||-32.4K||-|
|08:15||EUR||Spanish Manufacturing PMI||53.8||54.2||-|
|08:45||EUR||Italian Manufacturing PMI||48.4||49.3||-|
|09:00||EUR||Final Manufacturing PMI||51.0||51.0||-|
|13:30||USD||Core PCE Price Index||m/m||0.0%||0.0%||-|
|14:45||USD||Final Manufacturing PMI||53.7||54.1||-|
|15:00||USD||ISM Manufacturing PMI||55.5||54.9||-|
|15:00||USD||ISM Manufacturing Prices||38.5||40.1||-|