Forex Crunch Jobless Claims refuse to go down

Jobless Claims refuse to go down
Australian Employment Boosts AUD/USD
NZD/USD Rises on Rate Hike and Future Hikes
Forex Daily Outlook – June 10 2010

Posted: 10 Jun 2010 05:34 AM PDT

American unemployment claims rose from 453K to 457K – more risk aversive trading expects currency traders.

American unemployment claims disappoint once again – instead of dropping to 447K, they rose from 453K to 457K. While the gap isn’t so big, this adds to the evidence that was seen in the Non-Farm Payrolls – the American job market is recovering slowly.

Non-Farm Payrolls disappointed last week with a very small rise in the private sector. While the overall number was great, around 430K, the potion of the private sector was only 41,000, much lower than 180K that economists predicted. The government’s share was due to the decennial census, and it will drop now that the census is over.

This means that the core situation is still dire. The fresh figure from the jobless claims shows that this trend continues. Unemployment Claims continue to show high numbers. A drop below 430K weekly claims is necessary for a sustainable growth in employment.

Currency markets enjoyed a relatively calms week up to now, with good news from Australia and New Zealand, and no bad news in Europe. This helped the Euro/Dollar climb above 1.20, but it’s still below the previous support line of 1.2140, which is now a resistance line.

These bad job figures can trigger new risk aversive trading, hurting the Euro, at least it’s not the European debt problems that cause it. EUR/USD is trading slightly lower after the release – 20 pips.

Tomorrow, we have retail sales and consumer confidence from the university of Michigan. The predictions for retail sales show slow growth, while consumer confidence is expected to rise nicely.

It will certainly be another interesting Friday.

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Australian Employment Boosts AUD/USD

Posted: 10 Jun 2010 12:34 AM PDT

The Australian unemployment rate unexpectedly dropped. Together with less fear from Europe, the Aussie is making a nice recovery after taking a hit by the Non-Farm Payrolls. Update on jobs and on AUD/USD technicals.

Australian job figures were a great surprise: 26,900 jobs were gained last month, higher than the 20K gain that was predicted. This surprise followed last month’s great gain of 35,300, which was also revised to the upside.

A bigger surprise was seen in the unemployment rate – economists expected it to remain unchanged at 5.4%, but it fell to 5.2%, the low level already seen in February. The drop would stronger if the population wouldn’t be growing so fast. A gain of 2.9% was also recorded in the amount of worked – very impressing figures indeed.

All this positive data puts pressure on the central bank – the RBA paused last week, leaving the interest rate unchanged at 4.5%, after 6 rate hikes. No further hikes were expected in 2010. The strength of the economy, as seen in the job market, could lead to rising inflation and to another rate hike in 2010.

AUD/USD jumps

The Australian dollar traded at 0.8270 before the release, and now trades at 0.8370, a rise of 100 pips. It already struggled with 0.84. The next line of resistance is at 0.8477, which was a line of resistance last summer.

Even stronger resistance is found at 0.8567 – this worked as a clear line of support and resistance, and a break above this line is critical for further gains.

Looking down, 0.8230 continues to provide support, also being a line of resistance in the past. This is only a minor line. The year-to-date low of 0.8066 is huge support line, being tested at the beginning of the week, after serving as a bottom twice in May.

A lot depends on European problems – risk aversive trading, mainly caused by European debt issues, has sent traders away from “risky” currencies such the Aussie, despite the high yield, and sent them to so called safe currencies. As the pressure on the Euro eased this week, with EUR/USD rising above 1.20, the Aussie could also make gains.

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NZD/USD Rises on Rate Hike and Future Hikes

Posted: 09 Jun 2010 04:03 PM PDT

New Zealand’s RBNZ was the third central bank to raise the rates. This is only the beginning, with more hikes expected. NZD/USD likes it. Update on this currency.

Alan Bollard, governor of the Royal Bank of New Zealand, didn’t disappoint traders, as he followed Australia and Canada. The Official Cash Rate in New Zealand is now 2.75%, up from 2.50%. This raise will soon be translated into floating mortgage rates, cooling the real estate market and taming inflation. This is only the first step:

Bollard already said that this tightening cycle won’t be at the same extent as the previous one. This means that an OCR of 8.25% is very unlikely, but there’s a lot in the middle. ASB economist Jane Turner said that while the European problems stay on the radar of the bank, we will probably see a hike of 0.25% in every upcoming meeting, until it hits 5%.

New Zealand enjoys a nice annual growth rate of 3.5%, and good trade with China. The strong winds in Europe are very far from this small distant country.

NZD/USD reacted with a rise – it jumped from 0.6660 to 0.6740 (at the time of writing) – this 80 pip jump is abnormal for this pair. It’s still far from the strong resistance line of 0.6850. If it does break higher, the next line of resistance is at 0.70 – a round number.

On the other hand, this move was expected, and the initial rise could be followed by another dip. NZD/USD already reached 0.6570 this week, almost matching last week’s low, and creating a double bottom. A break below this line would send the pair towards support at 0.64, but this doesn’t look likely at the moment.

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Forex Daily Outlook – June 10 2010

Posted: 09 Jun 2010 02:00 PM PDT

US Unemployment Claims and Trade Balance followed by Canada’s Trade Balance highlight this day’s events. Let’s see what awaits us today.

In the US, Unemployment Claims are expected to continue decreasing from 453K to 447K which is a good sign for the US market.

Later in the US, Trade Balance shows the opposite inclination expected to increase its balance of trade deficit by $400,000,000 from 40.4B in May. Federal Budget Balance is also expected to drastically increase its deficit exceeding May’s report by 55.9B reaching -138.6B may be caused by foreign aid plans.

In Canada, Trade Balance is expected an improvement of 0.4B following May’s decline reaching a balance of trade surplus equivalent to 0.7B.

More in Canada, BOC Governor Mark Carney speaks at the 35th International Organization of Securities Commissions (IOSCO) Annual Conference, in Montreal may provide insight on interest rates policy.

Finally in Canada, New Housing Price Index is expected to remain 0.3% as in May’s report.

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

In Europe, ECB President and Vice President are holding a press conference where current and future monetary policy will be discussed.

Also in Europe, European Central Bank is likely to once again leave its minimum bid rate at 1.00%.

Later in Europe, French Industrial Production is expected to drop by 0.3% from 1.0% in May.

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

In Great Britain, Asset Purchase Facility measuring the total value of money the BOE will create and use to purchase assets in the open market is expected to remain 200B as in the previous month and the Official Bank Rate is also due to stay 0.50% without change.

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

In Australia, Employment Change is expected to reach 16.1K which is 17.6K lower than in May however can still have valuable positive influence on the market.

More in Australia, Unemployment Rate will probably remain 5.4% as in May presenting an overall positive indicator on the Australia's job growth.

Finally in Australia, RBA Governor Glenn Stevens speaks at the Western Sydney Business Connection, in Castle Hill may affect currency and provide clues to future monetary policy and MI Inflation Expectations will probably remain around 3.6%.

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

In New Zealand, Alan Bollard Governor of the Reserve Bank of New Zealand testifies about monetary policy before the Parliament’s Finance and Expenditure Select Committee, in Wellington. This could have a strong effect on the currency.

That’s it for today. Happy forex trading!

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