July 3rd 2009, Traders Will Get A Breather Today

[carlos_alvarez]

The USD picked up ground in a swift manner against the EUR and the GBP when the jobless data showed that the U.S. unemployment situation is still getting worse. The Non Farm Employment Change numbers produced a figure of minus -467K compared to the estimate of minus -360K. The Unemployment Rate now stands at 9.5%, which is a 26 year high. The outcome from the payrolls roiled the equities markets in a violent manner as both the Dow and S&P tumbled. The weakness from Wall Street had an immediate effect on the USD. The greenback found backing as weary investors turned to the proverbial ‘safe haven’ plays. The U.S. is on holiday today and trading from the States will be extremely light in the currency markets.
No data will be coming today from the U.S. because of the Independence Day celebrations getting started and Monday will see the release of the ISM Non Manufacturing PMI. Traders should expect a relatively flat marketplace today and if volatility rears its head within the currency markets it could be taking place because an investor is trying to take advantage of what should be less than exciting volume. The results from the jobless data will certainly start yet another firestorm as its merits are debated. Some economists are sure to point out that the unemployment data is a lagging indicator – meaning that it is not forward looking. However, others will point out that unemployment is a prime motivator within consumer confidence and that weak job prospects coupled with the fear of losing a job in a deep recession will continue to cause ill winds. Because of the holiday in the U.S. today the markets could see some players try to take advantage of a timid market. Traders will have to be aware that today’s results may be due to residual effects from yesterday, but also may lack impetus from real market movers.

EUR
As expected the ECB did not change their interest rate and the EUR found itself trading in a dollar centric mode coupled with rather interesting issues arising from the European Union. The EUR lost ground to the USD in a rather quick pace as international equity markets slipped on the negative U.S. data. Adding to this picture was the press conference held by ECB President Trichet who proclaimed the ‘party line’, saying that signs of stability have emerged although economic activity remains week in the European Union. He added that there is a chance for growth coming about sometime in 2010. Trichet also talked about the banking situation in Europe, encouraging banks to lend more in order to help stimulate the economy. However, it remains unclear at best if financial institutions have that capability. Europe did release its Unemployment Rate yesterday and the broad data showed that the continent’s jobless problems are increasing. A rate of 9.5%, the same exact rate as the U.S. was reported. The German Parliament today will be discussing the possibility of creating a ‘bad bank’ in order to handle the toxic debt within their financial system. The European Union will release its Retail Sales figures today. It should be a relatively flat day for the EUR due to the holiday across the ocean but traders should be cautious for sudden gyrations.
GBP
The Sterling lost ground to the USD on Thursday on the heels of the jobless data from the States. Only the Construction PMI data was released yesterday and it produced a reading of 44.5, which was below the forecasts of 46.1. The Halifax HPI has been pushed off again and is now tentatively showing a possible release this coming Monday. That essentially leaves only the Services PMI as the main economic data and it is forecasted to be 51.8. Making some waves yesterday from the U.K. is a report that the government is going to issue new regulatory standards for its banks next week and they supposedly will be much ‘harsher’ than the previous model practiced. With the holiday being celebrated in the U.S. today, the GBP could find itself wandering within a relatively well known range going into the weekend.
JPY
The JPY picked up some ground against the USD as global equity markets were propelled downward on Thursday. The violent reaction in the bourses caused the risk adverse to come out of the cracks as expected. However, the trading between the JPY & the USD as pointed out several times is within the firm grasp of a consolidated pattern and its movements have been rather muted. Gold traded around the 933.00 USD mark as the day came to an end. JPY traders should expect a rather quiet day of movement considering the U.S. holiday.
Written by: Robert Petrucci
Bforex Chief Commodity Expert and Forex Analyst

[Sofia.forex]

The US’s non farm payrolls are due out later on today and for all their trying, the US government has been trumped by a private firm in revealing these numbers.

The street expected about 360,000 jobs were lost, a nice decline and a sign that things might be getting better. However, ADP, the largest payroll processing service in the US, reported that 470,000+ jobs have been “removed from the payrolls” of the companies that ADP services.

Keep in mind that ADP does not service everyone – there are other services and many small businesses do the payrolls by themselves. So it is not out of bounds to think that this number, 470,000 will be higher. For the Dollar, a higher number can be damaging but it is not the only threat to the greenback.

[Somya Gabriel]

Yes even i read that on Wednesday, the ADP (remember, the payroll service) came out showing that they had dropped over 470,000 jobs from their weekly rosters, which means 470,000 people were no longer getting paychecks. But Forex analysts don’t take this seriously because it does not suit their interests, they only look at the hard data.

Well, the hard data came out on Thursday from the US government and guess what? 467,000 jobs were lost when the street was calling for 360,000 – over 100,000 jobs more than anticipated were dropped. But here is another lesson for you – and perhaps you can profit from this as well.

[Sofia.forex]

Thats right somya, By comparison, the rise in the unemployment rate for June was small, up just a tenth of a percentage point to 9.5 percent. Many economists predict it will hit 10 percent this year and keep rising into next year before falling back.

[Somya Gabriel]

yea....The US unemployment figures released last week do NOT include those who are no longer getting unemployment checks (In the US you get benefits for several months and then it stops), it does not include those who got part-time jobs (which is called under-employment as the money they make is not enough to sustain themselves – but they do not qualify for federal benefits) and it does not include those who were recently laid off (by my count there was at least 38,000 in the second half of June from the Auto dealers and manufacturers) as it takes three weeks to process these claims.

[Sofia.forex]

The news update was quite perfect for me, thank you for that. The recent news i read says that sterling is the weakest among major currencies today and the pull back against dollar and yen are most apparent. Markets seems to be concerned with UK's financial health with ballooning budget deficit. What do you think about it?

[Somya Gabriel]

Yes, it was. actually all this is because of some in the banking sector, the companies that have been accused of starting the fire, were at record highs as the companies took advantage of the volatile markets to turn a profit.

Based on the my opinion is buying pair from 1.6450 To 1.6560 and stop loss below 1.6360, might be appropriate.

[forexboy]

Nice news affecting the market prices, I'm just a total newbie here and It seems that you can predict the price movement by simply studying the news.

[Somya Gabriel]

Its good that your are finding information quite good. Well, the Dollar fell broadly on Monday, as a rise in US new-home sales last month boosted risk appetite at the expense of the Dollar’s safe-haven appeal.

Forex Investors sold the dollar, after data showing sales of new single-family homes in the United States rose 11 percent in June from the prior month. Analysts said data shows further evidence that the housing sector, which led the economy into the current recession, was starting to rebound.

On a three-month moving average, the report suggested that new home sales may have hit a bottom in January, and are starting to increase slightly.

[Sofia.forex]

we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the MACD lines in a bullish direction and crossing below the zero line. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bullish direction.