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Friday, 5 Dec 2008
Will Today's Non-Farm Employment Data Drive USD Lower?
Today, traders should pay close attention to the release of the U.S. Non-Farm Employment Change report. According to analysts, the report is expected to show 320,000 less jobs for the month of November in the U.S. economy. The news surrounding this important event may have a strong influence on the USD today, potentially driving the EUR/USD currency pair to above the 1.2800 level.
USD - High Unemployment and Low Non-Farm Figures might Lower the USD.
The U.S. Dollar experienced heavy losses against its main rival currencies in Thursday's trading session. This was amid the slash of Interest Rates by Official Bench Institutions in a measure described as a proactive step by analysts to stave off the global recession. The greenback was unable to take advantage of yesterday's trading day that saw the European Central Bank (ECB), the Bank of England (BOE), and Sweden's Riksbank reduce their Interest Rates. In the past, Interest Rate reductions in Europe and Britain had reduced the attractiveness of the EUR and GBP, because the carry trade advantage of these currencies decreased against the Dollar.
Despite the cut in Euro-Zone Interest Rates, the USD was trading lower yesterday at 1.2846 vs. the EUR, down from 1.2676 during the previous session. The USD was trading down against the JPY to as low as 92.04 during Thursday's trading session. The USD was negatively affected yesterday due to the release of pessimistic Unemployment Claims data, which showed that U.S. weekly unemployment claims continued to be above 500,000. Analysts expect the figure to increase in the near future as the deepening economic slump is likely to force a broad spectrum of firms to cut more jobs. Another factor that negatively impacted the U.S. Dollar yesterday was Factory Orders plunged by 5.1% from the previous month. This was the largest drop since July 2000, and above the 4% decline forecasted by economists.
During the Federal Reserve Board Chairman Ben Bernanke's speech about housing finance yesterday, he urged that more aggressive steps need to be taken in order to rapidly decrease home foreclosures. This has been one of the most visible outcomes of the severe U.S. economic downturn. Many analysts suggest that the Fed has started already begun to employ a more aggressive policy against tackling the recession, such as reviving private bank lending. Bernanke has also joined his European and British counterparts by cutting Interest Rates aggressively in recent months. He is likely to cut Interest Rates by a half percentage point to 0.5% at the December 15-16 Fed policy meeting.
Looking ahead to today, pay close attention to the release of the U.S. Non-Farm Employment Change report at 13.30GMT. According to government advisors, the report is expected to show 320,000 less jobs for the month of November in the U.S. economy. If the forecast is correct, analysts argue that this would confirm that the US economy has been recession since December 2007. The outcome of the release of this important data may potentially drive the EUR/USD currency pair to above the 1.2800 level later today.
EUR - EUR is Likely to Trade Volatile Today as Traders Still Respond to Thursday's Rate Cut
The unusually large Interest Rate cut made by the European Central Bank (ECB) of 0.75 basis points made it clear that the ECB is trying its best to boost the Euro-Zone economy. The EUR was bullish as a result of the cut yesterday, and rallied against all its major currency counterparts. The EUR/USD currency pair traded as high as $1.28, almost 3 cents higher from the session low of 1.2550. The EUR/GBP currency pair also traded higher, at a record high of 87.25. Analysts say that this was due to rumors that the Britain is more likely to join the EUR than ever before.
Following the announcement of the ECB's cut in Interest Rates, the bank's President Jean-Claude Trichet warned that there may be a risk of a protracted economic slowdown. The ECB previously forecasted that the Euro-Zone economy will contract for the next year, while inflation is set to fall well below the ECB's 2% price stability target. Trichet denied suggestions that the Euro-Zone may be faced with the risk of deflation. Analysts argue that deflation could reduce the possibility of a potential economic recovery in the Euro-Zone in the second half of 2009.
Today, only one major economic event will be released in the Euro-Zone. The German Factory Orders indicator is set to be released at 11GMT, and analysts predict it likely to recover to 0.2%, a 1% difference in change from last months 0.8% drop. This indicator measures the value of new purchase orders placed with domestic manufacturers for durable and non-durable goods. It is an accurate pre-cursor for overall European economic movement. Traders should also watch out for any unexpected political announcements from the region that could have an impact on the EUR in today's trading session.
JPY - JPY is set to Move on the Release of European and U.S. Economic Data Today
The Japanese currency recovered to EUR/JPY 117.96, after losing ground against the EUR in the earlier part of the trading session on Thursday. The JPY nonetheless rallied against the USD during yesterday. This was in response to falling stock prices and persistent worries about a deepening economic downturn that has driven traders to the safe-haven Yen. In the past, the low Japanese Interest Rate helped hold the value of the JPY lower than other currencies as traders used the Japanese currency to fund the purchase of higher yielding assets. However, with global Interest Rates being slashed, the value of these carry trades have declined and the counter-currencies seem less attractive as comparatively the Japanese Interest Rates aren't as low as they were several days ago.
Today, Japan will be absent from the economic calendar. The JPY's trends are likely to be affected by news developments from Europe and the United States. Analysts forecast that the USD and EUR are expected to continue a volatile trading session today and their crosses with the JPY are likely to be affected too. Traders should keep a close eye on the news coming out of the U.S. and Europe as these economies will probably be the deciding factors in the JPY's movement today, especially the release of U.S. Non-Farm Employment Change data later today.
OIL - Price of Crude Oil Set to Sink Until the Mid-December OPEC Meeting
The Interest Rate cuts made by the European Central Bank (ECB) and the Bank of England (BoE) confirm worries that the economic slump is likely to reduce energy demand. Oil prices dropped more than 6% yesterday, to its lowest level in nearly 4 years to about $43.80 a barrel.
According to analysts, the recent decline in Oil prices was due to new fears that the demand for Oil from the United States and Europe are likely to continue its drop in the coming year. The economic report yesterday from the U.S. that showed Factory Orders had plummeted for a third straight month in October reflected weak demand both at home and abroad.
The Organization of the Petroleum Exporting Currencies (OPEC) members refrained to cut Oil production during their recent meeting last weekend in Cairo, Egypt. Analysts, forecast that the price of Oil will continue to slip until the December 17 meeting of OPEC in Algeria.
The pair is testing the very important key resistance level of 1.2800 and is looking to breach. The daily RSI and Slow Stochastic are very bullish and it appears that the breach might be imminent. A preferable strategy for today might be to wait for the bullish breach and swing on the trend.
Narrow range trading continues as the pair did not make a significant move in either direction. The daily chart is showing first signs of a bearish momentum as the slow stochastic shows no crosses and the RSI floats near the 50 level. 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 is showing renewed bearish momentum within a wider bearish channel. The daily RSI and Slow Stochastic are floating below the 50 level which implies that the bearish move might be relevant on the daily level as well. Next target price might be 90.00.
After another failed attempt to break the 1.2200 it appears that the bearish momentum is back. The 4 hour chart is showing strong bearish momentum and the RSI oscillator on the daily chart supports the notion. Next target price might revolve around 1.0900 on the first move.
The Wild Card
Gold broke the 780.00 support level. Gold is in a downtrend supported by the 1 Hour Exponential Moving Average. Bollinger Bands on the daily chart are widened indicating increased volatility. We should expect to see a bearish configuration today. The target is expected to hit the level of 750. This provides forex traders with an opportunity to go short on a relatively healthy downtrend
|14:30||USD||Crude Oil Inventories||1.4M||2.1M||-|
|17:01||USD||10-y Bond Auction||2.80|2.5||*||-|
|18:00||USD||Federal Budget Balance||-10.4B||-223.2B||-|
|20:00||NZD||Official Cash Rate||2.50%||2.75%||-|
|20:00||NZD||RBNZ Press Conference||*||*||*|
|20:00||NZD||RBNZ Rate Statement||*||*||*|
|20:00||AUD||RBNZ Monetary Policy Statement||*||*||*|
|23:50||JPY||Core Machinery Orders||m/m||-15.7%||7.3%||-|
|00:00||AUD||MI Inflation Expectations||2.3%||*||-|
|00:01||GBP||BoE Quarterly Bulletin||*||*||*|
|00:01||GBP||RICS House Price Balance||53%||52%||-|
|01:10||NZD||RBNZ Gov Wheeler Speaks||*||*||*|
|09:00||EUR||ECB Monthly Bulletin||*||*||*|