Market Volatility Expected to Continue Today as Non-Farm Payrolls Awaits.
Following an intense trading session, on which gold dropped below $1,060 an ounce, crude oil declined to $72.40 a barrel and the EUR/USD fell to the 1.3670 level, another exciting trading day is expected before the weekend begins. The U.S Non-Farm Payrolls is scheduled today at 13:30 GMT, and as always promises to create extraordinary volatility in the market.
Economical News
USD
The Dollar rallied against the Euro yesterday, gaining over 200 pips. The EUR/USD pair reached a 9-month low as a result, dropping to the 1.3670 level. The Dollar also gained about 200 pips vs. the Pound today, marking an extremely bullish session.
The Dollar's bullish trend continued yesterday. It appears that the risk-aversion is currently dominating the market, as the Dollar seems to surge regardless of the data published from the U.S. economy. Over the last two weeks the Dollar rose due to an improving housing sector, a halt in unemployment growth and rising inflation. However today, the Dollar rallied following a batch of disappointing data, including worse than expected employment figures. The weekly Unemployment Claims rose by 8,000 during the past week to 480,000 people who filed for unemployment insurance for the first time during the past week. Currently the Dollar's bullish momentum seems be quite solid, and somewhat immune to negative data.
Nevertheless, today's trading session can put a stop to the bullish trend or significantly extend it. Today is the first Friday of the month, and as such the U.S. Non-Farm Employment Change report is expected. Analysts forecast that today's publication will provide the first positive figures since January of 2008. This will be yet another strong indication that the U.S. economy is recovering at a faster pace than expected. This has potential to boost the Dollar once again today against the major currencies, especially the Euro and the Pound. However, an unexpected negative end result could initiate a reversal in the market, and forex traders should be prepared for harsh volatility today.
EUR
During yesterday's trading session, the Euro dropped against all the major currencies. The Euro is currently traded at a 9-month low against the Dollar, as the EUR/USD pair dropped over 200 pips, reaching the 1.3670 level.
The Euro's decline was initiated today when the European Central Bank (ECB) announced that the Minimum Bid Rates, which are the European Interest Rates for February, will be left at record low of 1.00%. The Euro dropped sharply as a result, expressing investors' desire to see an interest rates hike in the Euro-Zone. In addition, following Greece's deficit concerns, the ECB President Jean-Claude Trichet said today the many Euro-Zone countries will have large, sharply fiscal imbalances. There are currently concrete worries that the Euro-Zone's leading economies will be damaged as a result of the difficulties of the smaller economies, turning investors to look for safer currencies such as the Dollar and the Yen.
Looking ahead to today, the most interesting data from the Euro-Zone looks to be the German Industrial Production figures for December. Analysts forecast that the Industrial Production, which measures the value of output produced by manufacturers, rose by 0.6% on December. If the actual result will be similar, it is likely to support the Euro.
JPY
The Yen soared against all the major currencies during yesterday's trading session. The Yen gained over 200 pips against the Dollar today and over 400 pips against the Euro, sending the EUR/JPY pair to an 11-month low.
The Yen's remarkable bullish session came predominantly as a result of fears regarding the Euro-Zone's worsening fiscal problems. The European Central Bank announced today that several countries might have fiscal imbalances this year, turning investors to search for safer assets. In addition, the Yen also strengthened against the Dollar, following disappointing U.S. employment data which were published yesterday. It now seems that as long as the current risk aversion inclination will continue to dominate the market, the Yen will continue to strengthen.
As for today, there is no significant news publications expected from the Japanese economy. Therefore traders are advised to follow the main data from the U.S. economy. Special attention should be given to the Non-Farm payrolls report that is likely to have the strongest impact on the market today.
Technical Analysis
EUR/USD
The weekly chart shows a strong bearish trend with no signs of slowing. Both the 7-day and 14-day Relative Strength indicator are trading sharply below the 30 level and have not yet made a move to rise. The price has broken its 50% retracement level from the previous bullish trend at a price of 1.3746 and now could fall to the 68% retracement level to 1.3296.
GBP/USD
The daily chart displays a downward sloping MACD histogram, indicating the momentum of the pair is moving lower. The sharp downward trend has arrived at the significant support level of 1.5715. The previous bearish move ended at this price level. If the pair is able to breach this support line, we could see the price move lower to the next significant support level of 1.5350.
USD/JPY
The weekly chart shows a significant bearish trend that may have room to extend. The MACD shows a potential bearish cross forming with a downward sloping histogram, hinting at a further lower price move. The price move began at the upper border on the Bollinger Band and has since crossed the 20-day moving average line. This shows the potential for further price declines, perhaps to the lower Bollinger Band at a level of 87.30.
USD/CHF
The strong bullish trend shown on the 4-hour chart may now be overbought and those who were long may want to trip their exposure. The 4-hour shows a bearish cross has formed on the Slow Stochastic Oscillator, indicating the potential for price move lower. The Momentum Oscillator has reached the upper boundary and has begun to turn lower, supporting the potential lower price move. The Relative Strength Index has moved into the overbought region but has yet to break the rising trend line or the upper boundary. Traders may want to wait for the break of the 70 line to close their long positions or go short on the pair.
Wild Card
Silver
Silver has experienced a significant downward price move that has now broken a long term trend line that began in November 2008. The price breach also passed the significant support level of 16.22. Forex and commodity traders who are short on silver may want to set their next price target at the new support level of 16.40.
Market Trend
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
|---|---|---|---|---|---|---|
| Daily Trend |  |
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| Weekly Trend | |
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| Resistance | 1.370 | 1.5822 | 90.56 | 1.0846 | 0.8764 | 0.8813 |
| 1.3740 | 1.5792 | 90.26 | 1.0816 | 0.8734 | 0.8783 | |
| 1.3710 | 1.5762 | 89.96 | 1.0786 | 0.8704 | 0.8753 | |
| Support | 1.3677 | 1.5698 | 89.33 | 1.0717 | 0.8640 | 0.8688 |
| 1.3647 | 1.5668 | 89.03 | 1.0687 | 0.8610 | 0.8658 | |
| 1.3617 | 1.5638 | 88.73 | 1.0657 | 0.8580 | 0.8628 |
Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 2010-02-05 | ALL | G7 Meetings | * | * |  | ||
| G7 Meetings Due to meet about a range of global economic issues including British pound depreciation and wider currency issues, in Rome | |||||||
| 2010-02-05 | 00:30 | AUD | RBA Monetary Policy Statement | * | * |  | |
| RBA Monetary Policy Statement The Reserve Bank of Australia (RBA) Statement on Monetary Policy provides a detailed assessment of current economic conditions, prospects for inflation, and output growth. The report is published quarterly and holds critical insights into the bank's view of inflation and the economic conditions that will effect interest rates. Traders scrutinize this report as it's been known to provide clues about the bank's future monetary policy. | |||||||
| 2010-02-05 | 05:00 | JPY | Leading Indicators | 90.7% | 93.7% |  | |
| Leading Indicators This report is combining ten leading indocators in order to measure overall economic health. The leading indicators includes average weekly hours, new orders, consumer expectations, housing permits, stock prices, and interest rate spreads. | |||||||
| 2010-02-05 | 07:45 | EUR | French Gov Budget Balance | -143.3B | - | | |
| French Gov Budget Balance This indicator measures the difference in value between the central government's income and spending for the year-to-date. | |||||||
| 2010-02-05 | 07:45 | EUR | French Trade Balance | -5.3B | -4.6B | | |
| French Trade Balance This report measures the difference between imported and exported goods and services from France. A positive number indicates that more goods were exported than imported; | |||||||
| 2010-02-05 | 09:30 | GBP | PPI Input | m/m | 0.1% | 0.9% | |
| PPI Input The Producer Price Index's (PPI) Input report is a measure for the inflationary rate incurred by manufacturers when purchasing goods and services. | |||||||
| 2010-02-05 | 09:30 | GBP | PPI Output | m/m | 0.5% | 0.3% | |
| PPI Output The Producer Price Index's (PPI) Output report evaluates the inflationary rate incurred by manufacturers when selling their goods and services. | |||||||
| 2010-02-05 | 10:00 | EUR | Italian Prelim CPI | m/m | 0.2% | 0.3% | |
| Italian Prelim CPI This is a preliminary report which measures the change in price for goods and services purchased by consumers. It precedes Final CPI and is an accurate gauge of the country's inflation. | |||||||
| 2010-02-05 | 11:00 | EUR | German Industrial Production | m/m | 0.7% | 0.6% | |
| German Industrial Production This indicator measures the total value of goods and services produced from the industrial sector of the German economy, including that from mines and utilities. | |||||||
| 2010-02-05 | 12:00 | CAD | Employment Change | -2.6K | 15.2K | | |
| Employment Change This report measures the number of jobs created during the previous month. It is one of the most important indicators of the economy's health since individual consumption makes up a significant portion of a country's GDP and has a direct correlation with employment. | |||||||
| 2010-02-05 | 12:00 | CAD | Unemployment Rate | 8.5% | 8.5% | | |
| Unemployment Rate This figure represents the percentage of potential workers that are currently unemployed and actively seeking a job. This report is typically overlooked as its information is derived from previously released indicators. | |||||||
| 2010-02-05 | 13:30 | USD | Non-Farm Employment Change | -85K | 13K | | |
| Non-Farm Employment Change This report measures the change in the number of employed vs. unemployed persons in all sectors of the economy except the farming industry. It is a leading indicator of economic health. | |||||||
| 2010-02-05 | 13:30 | USD | Unemployment Rate | 10.0% | 10.0% | | |
| Unemployment Rate This figure represents the percentage of potential workers that are currently unemployed and actively seeking a job. This report is typically overlooked as its information is derived from previously released indicators. | |||||||
| 2010-02-05 | 13:30 | USD | Average Hourly Earnings | m/m | 0.2% | 0.2% | |
| Average Hourly Earnings This indicator evaluates the level of inflation incurred by all sectors of the economy (excluding the farming industry) when paying wages to employees. It is a leading indicator of consumer spending because an increase to an employee's real salary signifies an increase to private consumption. | |||||||
| 2010-02-05 | 20:00 | USD | Consumer Credit | m/m | -17.5B | -9.3B | |
| Consumer Credit This is a report which measures the total amount of outstanding debt, such as credit cards and auto loans, held by consumers. | |||||||
| 2010-02-05 | 22:30 | USD | FOMC Member Bullard Speaks | * | * | | |
| FOMC Member Bullard Speaks Due to speak at the Jiao Tong University Forum, in Shanghai; | |||||||
