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Mercaforex, ADP Numbers Lead Jobless Data

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Dec 2, 2009.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    The USD found another day of rather benign range trading on Tuesday as investors took stock indexes higher and gold continued to find record territory. The USD continues to trade weaker by most measures against the EUR, but finds itself in a curious range with the GBP. Investors received two important pieces of data yesterday with the Pending Home Sales and the ISM Manufacturing PMI. While the Pending Home Sales numbers gained 3.7%, above the expectation of minus 0.4%, on the other hand the ISM Manufacturing PMI disappointed with a reading of 53.6 compared to the estimate of 54.8. Today the ADP Non Farm Employment Change statistics will be released and many investors will use these numbers to gauge what direction the other jobless numbers will take starting tomorrow. The ADP number today is forecasted to turn in a figure of minus -149K, which would be roughly a twenty five percent improvement compared to last month’s outcome.
    The USD continues to find a tough road against the EUR and other currencies as international bourses find investors with plenty of risk appetite. The Dubai affair, while not over, seems to have been accepted and digested. However, this does not mean that future problems will not arise from the crisis. Questions persists regarding the gains Wall Street has made but in pure trading parlance – the trend is your friend – and until something changes in attitude it remains a challenge to go against the market. The USD is banging up against its lows against the EUR and if bourses continue to find friends the greenback could very well be left to languish. With this in mind traders will have to keep their eyes on the jobless data which get underway today and will continue the remainder of the week.

    The EUR finds itself near the high end of its range against the USD and while it may not have gained much ground Tuesday, it did show an ability to press the greenback further. The EUR managed to have a ‘good’ session even as German Retail Sales proved rather unimpressive with an outcome of 0.5% compared to the estimated gain 0.6%. German Unemployment numbers however did improve with an outcome of minus -7K, better than the expected rise in jobless of 5K. Today will be a quiet day of data from Europe but investors will have their attention on the upcoming meeting from the ECB which will present its results tomorrow. Europe still has many questions facing its economic outlook and its banking sector continues to face scrutiny. The strong EUR is certainly not doing Europe’s biggest economic engine, Germany, any favors. Thus, tomorrow may prove interesting if ECB President Jean-Claude Trichet touches upon any misgivings about what is perceived by many to be an overvalued currency. The EUR continues to perform well against the USD in the face of bullish sentiment from international bourses.

    Rather whipsaw action was encountered by traders of the Sterling on Tuesday as U.K. economic data proved rather uninspiring. The GBP did finish the day positive. The Manufacturing PMI was released yesterday and turned in an uncomfortable reading of 51.8 compared to the estimate of 54.1. Also the Nationwide HPI was published and produced a slightly better figure of 0.5%, above the forecasted gain of 0.4%. The crisis stemming from Dubai appeared to take a breather yesterday and U.K. banking sector investors may have found comfort in this. Construction PMI statistics will be brought forth today and tomorrow the Services PMI reading is on the schedule. The Sterling has been a party to a rather dynamic trading range for a while versus the greenback and it appears a certainty that this will continue for the foreseeable future with so many U.K. economic issues confronting investors.

    The JPY lost some ground to the USD as bourses continued to find more stability as the wake from the Dubai crisis eased. Also the Bank of Japan issued a statement regarding its monetary policy yesterday, but in what has become constant theatre from the Japanese government, ministers continued to issue different opinions on the manner in which the economy should be directed including the JPY. Gold broke through to new heights yesterday and finds itself trading over 1210.00 USD an ounce.

    Technical Analysis

    Yesterday I wrote “It seems that we are trading within a type of trading channel filled with various gaps that are filled by other gaps. It’s a dangerous market to trade because the market can gap below or above your stop, and you will get taken out of the market at a worse price than you had anticipated. I continue to wait for a proper technical trading opportunity while the American equity market and the USD absorb the various fundamental factors that have come about over the last week”. This holds true today, but I will add that it looks like this market wants to trade higher. I am going to wait and see so I do not get killed by a possible gap down that moves against me. Support 1104.8, 1099.1, 1084.9, 1076.6, 1068.9 Resistance 1113.4, 1153.8

    The gold market broke over $1200 just a few hours after the American markets opened. There is potential for this market to keep trading higher but it feels like it may be getting a “bit long in the tooth”. At the moment we have reverted to our favorite trading pattern in gold, the consolidation followed by a push higher, followed by consolidation etc. On a one hour chart the risk is relatively small as this pattern continues to develop. I do not recommend getting into a longer term position. I suggest buying the bottom of the consolidation, with a tight stop, when it breaks higher, use a trailing stop, and protect your profits and yourself from any sudden weakness in this market. Support 1210.3, 1201.45, 1194.6, 1181.75, 1175.2, 1163 Resistance 1215.72….

    Yesterday I promised that I would show you how to trade the pound on a shorter time frame because it continues to trade within a well defined channel. Take a look at the one hour chart. First I would be looking for consolidation patters like we see in the gold market. When the market trades lower, those would be your entry points, just as when the market trades higher consolidation would be considered an entry point. Next look at these bullish flags (pennants). A strong push higher followed by a tight ranged descending channel. Once we see a breakout we know the pattern is holding and that the market will continue to trade higher. The best entry would be an anticipation of the up move, with a relatively tight stop below support. Looking at today’s patterns, I expect the Sterling to trade higher. Support 1.6590, 1.6549, 1.6461, 1.6379 Resistance 1.6640, 1.6746, 1.6876, 1.7042

    The Euro continues to trade higher. Bouncing off the uptrend we are looking at a target of about 1.5284. This trade has been developing nicely, and as the dollar continues to decline the only direction for this currency to go is up! We will see how we trade near resistance of 1.5145, since we failed to trade higher twice in the past. Perhaps three’s a charm! Technically the break of resistance should occur if all other factors remain constant. Support 1.5062, 1.4999, 1.4970, 1.4800, 1.4683, 1.4613, 1.4480 Resistance 1.5144, 1.5284, 1.5343, 1.5460.

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