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Jobless Surprise Caused Investors To Act

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Jan 12, 2010.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    Proving once again that the marketplace has a mind of its own, vast volatility immediately swept into the currencies upon the publication of the Non Farm Employment Change figures. A disappointing number of minus -85K compared to the estimate of minus -3K was enough to surprise investors. So what did the USD do? It got weaker. For a partial explanation of this, look to the equity markets that climbed upon the less than stellar jobless report. Why? Well one explanation could be that the weaker than expected employment statistics means that the Federal Reserve will not be altering their interest rate anytime soon, meaning that the near zero policy could remain intact for a while. This lastly means that some investors may look to the equity markets and try to look at riskier assets with greater potential for profit.

    The U.S will have no major economic data released today and that might serve as a respite for investors as they attempt to get their bearings set going into this week. Now that the holiday season is behind us, the international marketplace will begin to return to full volume. Tomorrow Trade Balance numbers will be brought forth, Wednesday will provide U.S. government budget figures, and on Thursday important Retail Sales outcomes will be presented. Also this week we will begin to see quarterly earnings start and Alcoa will be part of the parade today. After a month of rather strong gains against the major currencies, the USD will now begin to see the true weight of normal trading. The question is if the USD trend that started in December will continue or if a reversal will begin to emerge and sustain itself if investors begin looking at equity valuations and their risk sentiment differently.

    The EUR reversed in a strong manner against the USD on Friday and powered higher upon the economic data released from across the Atlantic. Without much in the way of major economic news from Europe on Friday, the EUR was left to trade in a dollar centric manner and it certainly did. French Industrial Production numbers are on the schedule today and ECB President Claude Trichet will be speaking. Tomorrow will be light with releases, but investors will begin to gear themselves for Thursday’s ECB monetary policy meeting and press conference. The European Central Bank will not be raising their interest rates, but the upcoming press conference could set off fireworks if issues such as Sovereign debt and growth prospects produce any unexpected remarks. The EUR struggled against the USD most of December, but its performance on Friday will cause doubt among bears. Even though Europe faces rather significant economic issues and a stronger EUR is not favored by Germany or France, if investors believe equities can be taken higher in the short term - the EUR may begin to find more backers.

    The Sterling like the EUR emerged with a positive performance against the USD on Friday. The PPI data from the U.K. was published and came in slightly above forecasts, but it was not a report that will heighten inflation talk. The BRC Retails Sales Monitor is on the calendar today along with the RICS House Price Balance data. Tomorrow Trade Balance figures will be released. While this data will be looked at, the underlying dynamic in the Sterling remains to be concerns around the amount of debt that the government is accruing and its ability to cope with it. The Sterling was pushed to the lower part of its range most of December but Friday’s trading may be enough to allow GBP supporters out of the closets. Expect to see the Sterling continue to turn in rapid movement this week.

    The JPY regained some ground on Friday after a day of rather bizarre policy statements coming from a variety of government officials. Today is a banking holiday in Japan and therefore the JPY may find itself being led by traders outside of the Asian sphere. Gold had its most significant day of upward trading in weeks on Friday as it climbed above the 1150.00 USD mark on the back of weaker greenback sentiment coming into the marketplace. Gold is set for an interesting week of trading.

    Technical Analysis

    Gold has been showing remarkable strength since 01:00 this morning, according to the Gold 1 Hour Chart. From the chart, what we see IS a nearly $15 price jump of Gold at 01:00 in the morning. In fact the candle rose so much; it seems quite amazing how the commodity is able to uphold its current strength! Since this bullish candle’s appearance on the chart, it is fair to say that there has been a battle between the bulls and the bears. However, I feel that the bears haven’t shown enough strength for now. Even if Gold does slide marginally, I am of the opinion that Gold is looking reasonably bullish for now. The current support levels lie at $1,114.86, $1,119.46 and $1,125.21, and the resistance level is $1,157.86. At the moment, the chart shows that Gold is trying to find a stable market price. If the commodity hits the $1,157.86 support level, then a Gold price of $1,160 may happen sooner rather than latter!

    In the past trading day, the pair has been recording both bullish and bearish behavior. Nevertheless, in the past 10 hours, I feel that it is fair to say that overall, the EUR/USD currency cross has become increasingly bullish. This is despite the EUR/USD 10 Minute Chart revealing some bearish behavior in the past hour of trading. The recent bullishness of the pair and the weakness of the U.S. Dollar may lend additional support to the Euro and the EUR/USD currency pair. Moreover, looking at the chart as a whole may actually expose that despite the last several candles on chart showing that bearishness still exists in the pair, in the longer-term, I think that the bulls may have the advantage. The current support levels are $1.4393, $1.4407 and $1.4471, and the latest resistance levels are at $1.4524, $1.4527 and $1.4533. A fall to the $1.4471 support level may lend support to a new bearish run for the pair. However, if the currency cross breaches the $1.4524 resistance level, then the pair could be trading at the $1.4600 resistance level in the near future.

    The GBP/USD 1 Hour Chart signals that since the 6th of January, the GBP/USD currency cross has failed to establish a stable and sustainable market price. Moreover, even top forex analysts have been puzzled by much of the current volatility of the pair. It should be noted that many professional fx traders are actually taking advantage of the present price swings. This market behavior may be partially due to semi-illiquid markets, as market forecasters and a number of professional fx traders don’t see normal market activity returning to the forex market until the end of January. The current support levels are $1.5958, $1.6015 and $1.6045, and the current resistance levels are $1.6098 and $1.6104. Despite the latest candle on the chart showing a slight fall in the price of the pair, the chart shows that in the past day of trading, bullishness has shown that it has gained a foothold.

    The currency pair has recorded a number of bullish and bearish trends since the commencement of 2010! The current market price is $92.30, as big banks and professional forex traders still wonder to themselves where is the USD/JPY currency pair heading next? If we look at the USD’s strength compared to Gold, Silver, the EUR and even the GBP lately, then a number of key fx analysts come to the conclusion that the USD/JPY pair may continue to sink. On the other hand, this may be the wrong view to take, as the USD/JPY currency cross is affected by many different fundamental and technical factors. For example, Yen carry trades, news coming from the Fed or Japanese economic growth. The latest support levels are $91.79 and $92.09, and the most recent resistance levels are $93.25 and $93.47.

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