Forex Crunch Euro not waiting for NFP – Dives Towards 1.20

Forex Crunch Euro not waiting for NFP – Dives Towards 1.20

Euro not waiting for NFP – Dives Towards 1.20

Posted: 04 Jun 2010 04:45 AM PDT


EUR/USD began a strong downwards move, falling now 60 pips below the previous multi-year low of 1.2110 set earlier this year. The move could be the result of an expiry of double no touch options, Hungarian worries and of tensions towards the NFP. 1.20 is a critical level eyed by traders, economists and politicians.

Euro/Dollar reached a new swing low 0f 1.2050, falling off over 100 pips from the previous trading levels of 1.2170 seen earlier in the day. This sharp move pierced through the 1.2142 level that was set a few weeks ago, and through the fresh low of 1.2110 set this week on fears of a double dip recession in Europe.

Double No-Touch Options and NFP

There are talks about double no-touch options that locked EUR/USD between 1.21 and 1.25 during the past week, and that these options were set to expire today. The other possible explanation is the high tensions towards the Non-Farm Payrolls.

In many previous releases of the NFP, the markets went in one direction before the release, only to leap back in the other direction after the released. This could well be another V-shaped move, so caution is recommended.

Hungarian trouble

The third reason for the drop comes from Hungary:

Hungary's economy is in a "very grave situation" because the previous government manipulated figures and lied about the state of the economy, Peter Szijjarto, a spokesman for Hungarian Prime Minister Viktor Orban, said at a press conference in Budapest.

Hungary doesn’t use the Euro, but it’s a part of the European Union as well, with debt to Euro-zone countries such as Germany, Austria and France among others.

EUR/USD Technicals

If 1.20 is convincingly broken, an avalanche is possible. The next technical levels are 1.1820, which was a line of support back in 2006, and 1.1630, which is a tough line. A break under 1.1630 will send the pair to the lowest levels since 2003.

A recovery will meet several minor resistance lines: 1.2142 is the immediate one, followed by 1.2330 and 1.2460.

– More updates to come –

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Strong Canadian Job Growth Leaves Loonie Unexcited

Posted: 04 Jun 2010 04:05 AM PDT


Canadian job figures surprised once again – 24,700 jobs were gained, 50% more than expected. The unemployment rate remained unchanged at 8.1%. No surprise here, but this is still great. The Canadian dollar wasn’t excited.

The Canadian Department of Labour Force Survey showed that gains were mostly seen in the services industries, and included gains for women above the age of 55 and for students entering the summer holiday. Why was there a weak reaction?

USD/CAD now (11:10 GMT) trades at 1.0426, after standing at 1.04 just before the release. The initial reaction was a drop in USD/CAD, but this was erased very quickly. Loonie traders are probably used to bigger surprises. This could explain the weak reaction. Last month saw a leap of 108K, almost 5 times the early expectations. We’ve seen huge surprises in the past as well.

Earlier this week, two major positive events were seen in Canada. Canadian GDP rose by 0.6% in March, double the early expectations, sealing the first quarter with an annual rise of 6.1% in its GDP, double the growth rate of the US.

The reaction was hesitant, in anticipation to the rate decision. USD/CAD didn’t move from the 1.04 to 1.0550 range.

The rate decision provided the long-awaited rate hike – Mark Carney’s BOC raised the Canadian interest rate by 0.25% to 0.5%, being the second Western central bank to do so. Also here, the reaction in forex was slow. This was due to the risk aversive trading, caused by European troubles.

The European worries even sent USD/CAD to 1.0580, but this proved to be a false break. As no news came out of Europe, the loonie began decoupling from the global fear, and made gains against the US dollar.

Thursday saw a break in the other direction, as USD/CAD fell under 1.04 and reached 1.0334, but this was corrected towards the release of the job figures – USD/CAD returned to flirt with the 1.04 line.

Next – The American job market

At 12:30 GMT, the mighty Non-Farm Payrolls are released. This will shake USD/CAD and all the markets. Expectations are very high. This week’s numbers strengthened the notion that “the sky is the limit“, and that the figure will be 500K or even above 600K.

Note that the unemployment rate is still high at 9.9%, and is expected to drop only to 9.8%, significantly worse than the Canadian figure of 8.1%, giving the loonie an advantage, at least regarding the job market.

Stay tuned as more updates will come.

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Forex Daily Outlook – June 4 2010

Posted: 03 Jun 2010 02:00 PM PDT


US Non-Farm Employment Change and the G20 meetings are the highlights the news followed by US Unemployment Rate and Average Hourly Earnings. Let’s see what awaits us today.

In the US, Non-Farm Employment Change is expecting to justify the optimistic predictions by climbing 175 K above April’s figures. This is a leading indicator of consumer spending reflecting on economic activity.

Later in the US, Unemployment Rate is anticipated to decrease by 0.1% from the rise of 9.9% in April

Finally in the US, Average Hourly Earnings is expected to go up from 0.0% in April to 0.1% indicating consumer inflation.

In Canada, Unemployment Rate is expected to continue its decrease by dropping from 8.1% to 8.0%

More in Canada Employment Change is expected to dramatically decrease from the record number of 108.7K in April to 20.7K.

Later in Canada, Building Permits are expected a sharp drop of -1.6% after 12.2% increase in April which was due to multi-family and industrial building permits.

Finally in Canada, Ivey PMI is expected to continue its growth from January exceeding April’s 58.7 by 0.9 points.

For more on USD/CAD, read the Canadian dollar forecast.

G20 finance ministers meet in Busan, South Korea, to discuss the global financial turmoil. Among the planned sessions are: Global Economy, G20 Framework for Strong, Sustainable, and Balanced Growth, Financial Regulatory Reform and International Financial Institutions Reform and Global Financial Safety Nets. This will have a major affect on the European currency since the G-20 will issue a notice to the market regarding the European risk.

In Europe, Revised GDP is expected to remain 0.2%.

For more on the Euro, read the EUR/USD forecast and Casey Stubbs' latest analysis.

In Great Britain, Halifax House Price Index is expected to rise by 0.3% compared to a drop of -0.1% in May giving a boost to the housing industry.

Read more about the Pound in the GBP/USD forecast.

In Switzerland, SNB Governing Board Chairman Philipp Hildebrand speaks at the Swiss Economic Forum, in Interlaken may affect interest rates and give insight on future monetary policy.

For more on the Aussie, read the AUD/USD forecast.

That’s it for today. Happy forex trading!

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Higher Tensions towards the Non-Farm Payrolls

Posted: 03 Jun 2010 08:54 AM PDT


The tension in the markets is rising towards the release of May’s Non-Farm Payrolls. The already high expectations were raised on new data that has emerged. Updated towards the big event.

EUR/USD returned back to the range after making a dip earlier this week. Another move after today’s figures was also contained. The markets are anxious towards the NFP, which mostly affects the Euro. Expectations rose from 500K to 524K. Let’s see why:

This post is an addition to my Non-Farm Payrolls preview published earlier this week.

New Figures

On Thursday, two major job-related figures were released. First, the ADP Non-Farm Payrolls showed a gain of 55,000 jobs, slightly below 68,000 that was expected. On the other hand, last month’s gain doubled to 65,000 on an upwards revision. All in all, ADP’s number for the private sector is aligning with the government’s number.

The private sector part of the Non-Farm Payrolls is expected to show a gain of 180,000. Also in previous months, the gain showed by ADP was smaller, but the trend is positive.

The second release was the weekly unemployment claims. Jobless claims dropped from 463K to 451K, within expectations. This number shows stability in joblessness, which confirms the expectations for a small drop in the unemployment rate – from 9.9% to 9.8%.

The rise in NFP expectations comes also from the ISM figures. The Non-Manufacturing sector, or services sector if you wish, remained unchanged, still a nice positive number – 55.4. A score above 50 means economic expansion. Also the manufacturing sector remained almost unchanged. In a report earlier in the week, it scored 59.7 points.

The American numbers didn’t provide huge surprises, but they confirmed a steady recovery on all fronts. Together with the government’s huge hiring towards the decennial census, the headline number of 524K – highest in 13 years, can be met.

General Notes

The release of the NFP is the most volatile event in forex trading, and has special characteristics. Here are my 5 notes for Non-Farm Payrolls trading.

I highly recommend following the Non-Farm Payrolls release with an excellent webinar from Alex Kazmarck. The webinar will benefit traders of all levels. Kazmarck brings 10 years of market analysis experience, and will talk about pricing action as it is occurring before, during and after the release of the Non-Farm Payrolls data.

Registration to the webinar is free, but is limited to 100 registrants. Click here to join.

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