Your Own Forex Reviews and Market Updates

Dismal non-farm payroll wipes out all positives from last week – rough week ahead for USD

Markets had set themselves up for a shock into the non-farm payrolls number, with analysts quite optimistic for a better number. However this was not to be and the headline number disappointed with 467k jobs lost in June compared with 365k expected.

The unemployment rate also crept closer to the 10% magnet, rising 0.1% to 9.5%. Optimists may wish to point out that the rate was below forecast and registered a slower increase than seen in previous months.

Average Earnings were flat for month-on-month comparisons, a low that has only been matched about five times since the early 1990’s. Average weekly hours declined to a new record low of 33.0 hours. The weekly claims number provided no cause for cheer, with yet another 600+ reading, even as Continuing Claims fell rather sharply.

Prior to this Sweden’s Riksbank had surprised the market with a 25bp rate cut, citing concerns about unemployment and falling production and its effect of prolonging the contraction in the economy. Riksbank Deputy Governor commented that rates could not “in practice” be cut any further (now at 0.25%).

The ECB on the other hand left rates unchanged and Trichet in his post-meeting press conference said rates were at appropriate levels. The EUR had eased back from early highs after Moody’s stripped Ireland of its last AAA credit rating and warned of further possible downgrades if more stringent fiscal measures were not adopted.

After the US data, the resultant reaction in both Forex and stock markets was brutal and quick, partly due to thin liquidity conditions ahead of today’s US holiday.

The USD rebounded sharply from its recent sell-off, posting gains across the board with a particularly strong performance against the commodity-bloc currencies that had risen during the recent bout of risk appetite, and compounding the pressure on the EUR.

Very little activity was seen in Asia after an early round of stops hunting/triggers in the EUR. The USD edged a tad higher on the index, up 0.12%, but players were happy to trade in tight ranges after most positions for the week had likely been wiped out in last night’s u-turn.

Europe has a limited data slate for today, with PMI data from the UK, Germany and Europe the main attraction. PMI data of late has tended to surprise to the upside and there is every chance that this phenomenon will continue though current forecasts are for an almost unchanged reading across the board.

Tags: Forex Brokerage; Daily FX; Forex Broker; Online Forex Review; Forex Online; fxguiding; Forex Trading;

US Consumers not finding any green shoots in their side of town

The USD was sharply weaker across the board yesterday after the previous push stronger. EURUSD rushed all the way back above 1.4000 resistances and on to the 1.4100+ level and AUDUSD rebounded sharply after a push down through the important 0.7850 area the previous day.

This action keeps the market largely in the range once again that it has held for some two weeks now, as every push to one extreme of the range suddenly is met with a wall of resistance.

This holding pattern may finally find resolution one way or another with the FOMC meeting and monetary policy statement later today. Bernanke’s rhetoric will be poured over for signs of cracks in the low rates policy.

So much noise has swirled on speculation of the Fed’s thinking on rates and the subject of “exit strategies” that the Fed will almost have to address these specific issues rather explicitly today.

The tendency is for Bernanke to surprise on the side of dovish caution rather than hawkishness, but let’s see what kind of mood the Fed chairman is in today.

It is more than disturbing that the US weekly consumer confidence plunged sharply over the last week and to only 1 point above its record low set in January of this year (the series began in 1985).

This development comes despite the huge rally in equities since early March and supposed signs  of stabilization that many are hoping will lead to recovery  – or green shoots, if you will.

Average people are apparently less affected by moves in the asset markets than the market would like to believe, and considering the need for the US consumer to continue to deleverage, the extremely weak sentiment reading suggests that end demand will remain low and disappoints the more bullish recovery scenarios. Final consumer demand will be a key factor at every turn as the US economy is to recover.

The European and early North American sessions are likely to be choppy and indecisive until the Fed makes its announcement at 1815 GMT. We still go with the idea that the market’s high risk appetite will eventually sour in the Forex online market. In the past, this would tend to have favored the USD, so let’s see if the USD/risk appetite inverse correlation holds on the other side of the FOMC meeting.

Tomorrow out of the US, we have the increasingly important weekly jobless claims number – will it scotch the hope that the USD economy is stable to improving or give the green shoots crowd further hope?

The Japanese JPY reversed sharply to the weak side after breaking to new highs against many of the other majors in recent days. The cause of the about face was difficult to tease out, but the Yen may simply have been piggy-backing the USD moves as USD and JPY crosses tend to head in the same direction.

Now we have bullish reversals for the JPY crosses – though we do have a hard time seeing this move finding sustenanace in the likes of EUR/JPY and AUD/JPY.

Movements in interest rates will be a critical input, and interest rates are more than likely headed places tomorrow with the Fed on tap.  JPY crosses may may be the big movers among the major currency pairs. 

Tags: Forex Brokerage; Daily FX; Forex Broker; Online Forex Review; Forex Online; fxguiding; Forex Trading;