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Friday, 6 Feb 2009
USD Heads Higher Before the All Important U.S. Non-Farm Payrolls Release
The Dollar consolidated gains against the EUR and JPY before the high impact U.S. Non-Farm Payrolls Report is released today. This indicator always provides for extreme market volatility in the major currency pairs. Traders may find good opportunities to enter the market following this vital announcement at 1:30pm GMT.
USD - The Dollar Gains Ground Ahead of U.S. Payrolls Report
The USD has strengthened against most of its major counterparts, continuing to prove that, for the time being, this is the solid currency that traders can rely on to provide them with steady profits. The EUR/USD stopped the upside move at a good resistance level of 1.2900 level and from then on the pair fell all the way down to the 1.2790 level. Risk aversion continues to give the Dollar strength and that is likely to continue until we see signs of stabilization.
The dollar rose yesterday on renewed hopes the Obama administration will shore up a tattered financial system, turning around markets that had tumbled on fresh signs of a deep recession. Moreover, U.S. Treasury debt prices also recovered slightly, as weak U.S. and Euro-Zone economic data trumped worries over an expected surge in new issuance, a day before the release of the widely anticipated payrolls report for January.
As for today, a batch of data is expected from the U.S. economy. These figures are expected to set the tone for the USD's pairs and crosses. Special attention should be given to the Non-Farm Employment Change which is expected to fall to 530K. Traders pay close attention to this figure as it has a strong correlation with the value of the U.S. Dollar. Also today, the Unemployment Rate is scheduled which should also have an impact on the market because if it delivers unfavorable figures it will validate a problematic U.S. market, and the USD is likely to weaken as a result.
EUR - EUR Fluctuates as ECB Keeps Interest Rate Unchanged
The EUR completed yesterday's trading session with mixed results versus the major currencies. The 16 nation currency fell against the USD, pushing the oft traded currency pair to 1.2790. The EUR experienced similar behavior against the GBP as the pair dropped from 0.8900 to 0.8745 by days end. The EUR did rise over 150 points against the JPY and closed at the level 116.38.
The European Central Bank (ECP) kept Interest Rates unchanged after four reductions since early October as officials gauge the severity of the recession before cutting borrowing costs again. The EUR may continue to be pressured as ECB President Jean-Claude Trichet said that despite the easing of inflation pressures, the door for further rate cuts will remain open in the next meeting. The recent string of poor economic data which stems from a deteriorating European economy suggests that Interest Rates may need to fall substantially in the months to come.
Looking ahead to today, the most important financial indicator scheduled to be released from Europe is German industrial production numbers. Analysts are forecasting this figure to increase from its previous reading. Traders will be paying close attention to today's announcement, as a stronger than expected result may boost the EUR.
JPY - Yen Rapidly Falls to One Month Low Against the Dollar
The JPY saw a very bearish trading session yesterday, losing ground against all of its currency crosses. The JPY fell to a one month low against the USD and closed at 90.80. Moreover, the Japanese Yen lost almost 150 points versus the EUR, closing at 116.38.
The Bank of Japan needs to keep an eye on the global economy and watch for the potential fallout that could come from this recent crisis. Japan's currency usually does well during times of economic downturn, but when investor confidence is restored, the market may see a sell attitude develop as traders return to their carry trades; selling JPY in exchange for higher yielding currencies.
Today, there is no major economic news expected to be released from Japan, however, we should see active JPY trading in response to key U.S. data releases. The near term outlook for the JPY remains relatively bearish. Therefore, traders are advised to follow US news and Euro-Zone data with extra precaution as they will mark future JPY price movements.
OIL - Oil Makes Light Gains in Early Trading
Oil prices rose slightly yesterday as part of a wider market rally on hopes the Obama administration's plan to shore up the financial system would help banks stem losses and revive lending. Prices had fallen earlier during yesterday's trading session as weak economic data stoked concerns about waning oil demand.
Recently, the lower demand has fueled the losses, and a rash of poor economic data this week has not provided any support. The U.S. Non-Farm Employment report today is expected to show a poor performance and traders may not see very much upside to Crude today.
The Slow Stochastic and the RSI on the daily chart are showing a continuation of the current bearish correction. There is also a very accurate bearish channel forming on the 4 hour chart. In addition, all indicators on the hourly chart are pointing down. Going short might be the right choice today.
This pair is still in the midst of a steady uptrend which is not yet showing any sign of leveling out. The RSI and Momentum on the 4 hour chart are still positively sloped indicating that there is still plenty of steam left in this bullish move. Once this pair breaches the 1.4680 level it's likely to make another sharp break upwards.
Narrow range trading continues as the pair did not make any significant move in either direction. The daily chart is showing signs of a bearish momentum. The Bollinger Bands are tightening and a breach might be imminent to any side. A good strategy might be to wait for the signal and ride the momentum.
The pair's bullish sprint has passed it through the 1.1700 level yesterday. As all oscillators on the 4 hour chart are pointing up, the pair might test the 1.1760 level - making a 2 month record.
The Wild Card
There is still a bearish configuration on the daily chart, indicating that the momentum is still down. The Slow Stochastic flows high supporting the notion that there is still room to run for this trend. In the shorter time frame there is a bullish cross forming on the hourleis indicates that there might be a small bullish correction before the bearish move resumes. Forex traders can maximize profits by selling on highs and taking advantage of a currently bearish trend.
|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||-|