US Dollar Surges on Nonfarm Payrolls, Europe – Can it Rally Further?
Euro Selling Accelerates as Debt Crisis Fears Continue to Grow
British Pound to Remain Under Pressure with Myriad of Data Due
Australian Dollar at Risk to Head Down Under in the Week Ahead
DailyFX provides forex news on the economic reports and political events that influence the currency market.
07 January 2012 03:14 GMT
The euro saw heavy bearish movement throughout the day yesterday despite positive US data which typically helps the currency. Euro-zone debt worries continue to send investors away from riskier assets. Whether today's US Non-Farm Payrolls can give the euro a boost to close out the week is still unknown.
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
| Daily Trend |  |  | | | | |
| Weekly Trend | | | | | | |
| Resistance | 1.3000 | 1.5670 | 77.80 | 0.9560 | 1.0365 | 0.8362 |
| 1.2954 | 1.5598 | 77.61 | 0.9537 | 1.0274 | 0.8318 | |
| 1.2881 | 1.5516 | 77.37 | 0.9475 | 1.0236 | 0.8290 | |
| Support | 1.2790 | 1.5495 | 77.20 | 0.9431 | 1.0155 | 0.8246 |
| 1.2761 | 1.5436 | 76.84 | 0.9361 | 1.0081 | 0.8201 | |
| 1.2745 | 1.5363 | 76.60 | 0.9317 | 1.0012 | 0.8165 |
The US dollar had a very bullish day yesterday, following a better than expected ADP Non-Farm Payrolls figure and Unemployment Claims report. Gains were made against the euro, British pound and Japanese yen. The EUR/USD fell to an 11-month low, while the USD/JPY shot up past the 77.00 level.
The ADP figure came in at 325K, well above the forecasted 176K. The ADP report is known as an important predictor of today's Non-Farm Payrolls (NFP) figure. The NFP is widely considered the most important global economic indicator, and typically generates heavy market movements.
The NFP will measure the number of non-farm jobs added to US payrolls during the month of December. Analysts are predicting the number to come in at around 152K, which if true, would signal a sizeable increase over November's figure.
The effect the NFP has on the markets has proven to be difficult to predict. On the one hand, a positive number tends to benefit riskier currencies like the EUR, GBP and AUD. On the other hand, should the figure come in below expectations, investors may decide to shift their funds toward safe-haven assets like the USD and JPY. Traders will also want to remember that the NFP number is very difficult to predict and it is not unheard of for the end result to come in well above or below original forecasts.
The euro extended its bearish trend on Thursday, as the euro-zone debt crisis continues to drive investors away from the currency and toward safer assets like the US dollar and Japanese yen. The EUR/JPY hit a fresh 11-year low while the EUR/USD dropped to its lowest level since December 2010. The bearish movement came in despite positive US jobs data which typically benefit riskier assets like the euro.
Today, traders will want to focus on the all-important US Non-Farm Payrolls figure, set to be released at 13:30 GMT. While a positive figure is expected, traders should not count on it helping the euro close out the week on a positive note. Any further negative news out of the euro-zone will likely cause the euro to drop further, especially against currencies like the greenback and yen.
The Japanese yen saw a very mixed trading session on Thursday. Against the euro, the JPY hit an 11-year high, largely due to the on-going string of negative news regarding the euro-zone debt crisis. At the same time, positive US jobs data sent the USD/JPY soaring above the 77.00 level.
Today, the Non-Farm Payrolls figure is likely to cause heavy volatility among yen pairs. A positive figure may cause the JPY to slip against some of the riskier currencies like the aussie or British pound. Should today's news come in below expectations, traders can expect the safe-haven yen to receive a healthy boost against all of its main currency rivals.
It appears that the price of crude oil peaked yesterday right around the $103.60 a barrel level before dipping in evening trading. That being said, the price of oil is still extremely high and analysts are forecasting the commodity to remain above the $100 level as long as tensions in the Middle East continue.
Today, traders can expect the current oil trend to continue following the recent EU embargo on Iranian crude oil. Furthermore, should the US Non-Farm Payrolls figure come in as predicted, crude oil is likely to see a boost along with other commodities to close out the week.
Technical indicators are showing that the pair may see an upward correction in the near future. The Williams Percent Range on the 8-hour chart has dropped into the oversold zone, while the RSI on the daily chart has dipped below the 30 level. Traders may want to go long in their positions.
The 8-hour chart's William Percent Range recently dropped below the -80 level, indicating that possible upward movement could occur. That being said, other technical indicators are inconclusive at the moment. Traders may want to take a wait and see approach for this pair.
Most technical indicators are showing this pair in the oversold region. The Stochastic Slow on the daily chart has formed a bullish cross while the Relative Strength Index is hovering around the oversold zone. Traders may want to go long in their positions.
The daily chart's technical indicators are showing that this pair is in the overbought region and may see a bearish correction. The Williams Percent Range is currently above the -10 level, while the Relative Strength Index is at the 70 level. Traders may want to go short in their positions.
The 8-hour chart's Stochastic Slow has formed a bearish cross, while the Williams Percent Range on the daily chart is currently right around the -10 level. These are both signs that downward movement could occur in the near future. Forex traders may want to go short before the downward breach takes place.
US Dollar Surges on Nonfarm Payrolls, Europe – Can it Rally Further?
Euro Selling Accelerates as Debt Crisis Fears Continue to Grow
British Pound to Remain Under Pressure with Myriad of Data Due
Australian Dollar at Risk to Head Down Under in the Week Ahead
DailyFX provides forex news on the economic reports and political events that influence the currency market.
07 January 2012 03:14 GMT
US Dollar Surges on Nonfarm Payrolls, Europe – Can it Rally Further?
Fundamental Forecast for the US Dollar: Neutral
The US Dollar (ticker: USDOLLAR ) surged against the Euro and other major counterparts, fueled by deterioration in Euro Zone tensions and unexpectedly strong US economic data. The domestic labor market unexpectedly added 200k jobs through the month of December, sending the unemployment rate to fresh multi-year lows and inspiring confidence in US growth. Momentum favors further Greenback strength, but extremely one-sided trader sentiment warns that any Euro/US Dollar corrections could be fierce in another week full of key event risk.
A relatively empty US economic calendar means that traders will focus on developments out of Europe, but traders should not ignore any fresh rhetoric from US Federal Reserve officials or late-week Advance Retail Sales data. The safe-haven US Dollar traded sharply higher on Friday despite a simultaneous rally in the negatively correlated S&P 500 and improvements in financial market risk sentiment. Why exactly?
We believe the US Dollar benefited from an important improvement in US Federal Reserve monetary policy expectations. The better-than-expected payrolls growth eases pressure on the Fed to enact further monetary policy accommodation. Such developments suggest the US Dollar could benefit from further improvements in labor market data and special focus remains on upcoming Fed rhetoric. The minutes from December’s Federal Open Market Committee (FOMC) meeting disappointed dollar bulls as the Fed struck a relatively dovish note on policy. Yet it will be important to watch how members react to December’s NFP data and its implications for employment trends.
US Dollar focus otherwise remains squarely on the Euro Zone and its many fiscal crises. It can’t be a coincidence that the EURUSD traded to fresh lows as the spread between Italian and German 10-year bond yields traded near fresh Euro era highs. CFTC Commitment of Traders data shows that speculators are their most net-short Euro against the US Dollar in history. Commercial traders are their most net-long, and it’s clear that positioning is dangerously one-sided. Yet what could happen to force an important EURUSD reversal?
It’s obvious that initial euphoria over previous European summits and fresh bailout plans was very short-lived, and traders need more than rhetoric to lift the Euro higher. At the heart of the issue is the lack of sustainability in sovereign debt loads. Very few are willing to buy Italian and Spanish bonds—especially as both countries have significant bond redemptions and funding needs in the first 3 months of the year. The uncertainty is driving the Euro sharply lower at the expense of the safe-haven US currency. As long as such flows continue, expect the EURUSD to hit fresh depths.
There are few important technical levels in the way of further Euro weakness, and indeed the next reaction low suggests the EURUSD could hit $1.2590 until a bounce. Of course, such incredibly one-sided sentiment warns that any short-covering rallies could be quite fierce. It will be critical to watch how the US Dollar trades into Sunday and through Monday’s close. Typically the first day of the trading week sets the pace for subsequent days, and high reversal risk puts special focus on early trading. – DR
DailyFX provides forex news on the economic reports and political events that influence the currency market.
06 January 2012 23:16 GMT
The greenback is firmer ahead of the close of North American trade with the Dow Jones FXCM Dollar Index ( Ticker: USDollar ) advancing 0.29% on the session. While today’s strong NFP print saw equities pare some of the early losses, the advance was short lived with stocks retreating once again in afternoon trade. Non-farm payrolls climbed by 200K, besting calls for a print of just 155K with the unemployment rate unexpectedly doping to 8.5% from 8.6%. While US data continues to improve, concerns regarding the deteriorating conditions in Europe have continued to weigh on broader market sentiment with European equities closing lower on the day. Various times throughout the week I’ve noted that we expect to see the inverse dollar/equity correlation breakdown this year with the dollar acting favorably to positive US data flow. Today we saw a hint of this decoupling as the dollar surged across the board on the stronger-than-expected employment data while equities moved higher. While the correlation still holds as of now, look for this to become more prominent later in the year as stronger US data decreases the likelihood of further quantitative easing and increases the likelihood the Fed will begin normalizing monetary policy.
The dollar breached the 10,000 level noted in yesterday’s report before encountering resistance at former trendline support, currently at 10,030. The index now eyes key resistance at the 76.4% Fibonacci extension taken from the August 1 st and October 27 th troughs at 10,070. While we expect a test of this level sometime this month, the greenback is likely to pare some of this week’s gains after three consecutive days of advances. The RSI reversal noted earlier this week has continued to support our bias with the oscillator crossing back above the 50-level as the slope steepens further.
A slight adjustment to our soft resistance targets show the index rebounding off the 10,030 mark just ahead of the European close. Interim support now rests at the 10,000 level, backed by soft support at 9980, the 61.8% Fibonacci extension at 9950, and 9912. A breach of topside resistance eyes subsequent ceilings at trendline resistance dating back to the December 14 th high and the 76.4 extension at 10,070. This level remains paramount for the dollar after failing four breach attempts late last year
The greenback advanced against three of the four component currencies highlighted by a 0.52% advance against the euro which reached its lowest levels since September 2010. As officials struggle to ease market jitters over the deepening debt crisis, investors have continued to turn on the single currency with the euro off by more than 1.8% in the first week of 2012. Longer-term prospects for the euro remain weighted to the downside noting that a pullback of some magnitude is likely before continuing lower. The top performer of the lot was the yen which continues to hold its ground as the low yielder continues to benefit from risk-off flows. The USD/JPY remains well supported at these levels with any advances in the yen likely to be tempered by ongoing intervention concerns.
Year to date the greenback has outperformed all the component currencies save the aussie which has gained 0.20% this week. Notwithstanding developments out of Europe, look for the dollar to pullback early next week before mounting an offensive that should see the index top the 10,070 key resistance level later this month.
--- Written by Michael Boutros, Currency Analyst with DailyFX.com
To contact Michael email mboutros@dailyfx.com or follow him on Twitter @MBForex .
To be added to Michael’s email distribution list, send an email with subject line “Distribution List” to mboutros@dailyfx.com
DailyFX provides forex news on the economic reports and political events that influence the currency market.
06 January 2012 19:06 GMT
Fundamental Headlines
• Unemployment Falls to 8.5% as U.S. Adds 200K Jobs – Bloomberg
• EU Governments Consider Delay on Any Iran Oil Ban – Reuters
• Iran Plans More War Games in Strait as Sanctions Bite – Reuters
• ECB Steps in as Italian Yields Hit 7% - WSJ
• Euro-zone Fears Grow on New Data – WSJ
European Session Summary
Markets consolidated in the overnight after yesterday’s rally by the U.S. Dollar, though only after higher yielding currencies and risk-correlated assets dipped to fresh weekly lows. Indeed, ahead of the storied U.S. nonfarm payrolls data release, the official gauge of the American labor market, the Greenback looked prime to breakout higher given recent data.
If yesterday’s ADP employment report was supposed to serve as a harbinger for today’s NFP release, it set up market participants for disappointment. The 325K private sector jobs that were reported to have been added in December, as per yesterday’s release, was offset by the official 212K figure, per the Bureau of Labor Statistic’s report on Friday. Overall, the 200K jobs added in December beat the consensus forecast of 155K, according to a Bloomberg News survey. Likewise, the unemployment rate dropped from 8.7 percent to 8.5 percent.
Dow Jones FXCM Dollar Index 5-minute Chart: January 6, 2012
Charts created using Strategy Trader – Prepared by Christopher Vecchio
Certainly, the reaction by the credit, currency, and equity markets suggests that we are at the beginning of a new era of correlations. Typically, on better than expected data, which would encourage risk taking, the U.S. Dollar has sold off in favor of higher yielding assets. Today, however, after the tremendous print, the U.S. Dollar found itself stronger – a sign that the U.S. economy may be decoupling from the rest of the world.
However, I would argue that the case of decoupling is misguided; the U.S. is the world’s largest economy, and if China is facing problems at the same time the Euro-zone crisis worsens, then the U.S. will suffer immensely. Simply put, globalization has put the American economy in the crosshairs as other major economies sink into recession. Instead, I would suggest that the bullish reaction by the U.S. Dollar post-NFP release shows that market participants are pricing out the likelihood for more quantitative easing by the Federal Reserve.
As data out of the U.S. has improved over recent weeks and months, Federal Reserve policymakers have softened their tone for more easing, albeit in the face of pressure from the public. As per the Federal Open Market Committee’s December minutes, it appears that the FOMC will outline the specific criteria necessary for monetary policy. As the FOMC has become more transparent, another round of easing – quantitative easing round three – is looking increasingly unlikely.
24-Hour Price Action
Key Levels: 14:05 GMT
Thus far, on Friday, the Dow Jones FXCM Dollar Index is higher, trading at 9998.87, at the time this report was written, after opening at 9989.74. The index has traded mostly higher, with the high at 10017.52 and the low at 9973.56.
--- Written by Christopher Vecchio, Currency Analyst
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com .
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, send an e-mail with subject line "Distribution List" to cvecchio@dailyfx.com .
DailyFX provides forex news on the economic reports and political events that influence the currency market.
06 January 2012 14:35 GMT
Talking Points
WTI Crude Oil (NY Close): $101.81 // -1.41 // -1.37%
Crude oil prices remain firmly anchored to broad-based sentiment trends, hinting an upswing may be ahead as the spotlight turns to the US Employment report on tap in the afternoon. Expectations call for nonfarm payrolls to rise 155,000 in December, marking the largest jobs increase in three months. Absent an unexpected gloomy headline out of the Eurozone this seems likely to boost risk appetite into the week-end on hopes an accelerating recovery in the US will help offset the global economic slowdown expected this year. Short-term decoupling from risk trends is not out of the question however as geopolitical risk creeps back into the picture after Iran threatened to hold military in the Strait of Hormuz in the coming weeks, threatening to disrupt a major shipping lane carrying close to 40 percent of the global seaborne crude supply.
On the technical front, prices moved lower as expected having put in a bearish Hanging Man candlestick below resistance at 103.35 , the November 17 high. Near-term support remains at 101.28 , with a break below that exposing the 100.00 figure and 97.89 . Alternatively, a reversal higher through immediate resistance clears the way for a push to 106.05.
Daily Chart - Created Using FXCM Marketscope 2.0
Spot Gold (NY Close): $1 622 . 72 // + 11 . 13 // + 0 . 69 %
Gold ETF holdings hit a two-month low yesterday – pointing to eroding investment interest in the yellow metal – and a relatively stronger US jobs report may stoke liquidation pressure as firming economic growth trims QE3 bets and weighs on demand for a hedge against runaway inflation. A lull in Eurozone debt crisis news-flow likewise bodes ill for gold prices, denting safe-haven inflows. Continued saber-rattling in Iran may be a mitigating however, capping the downside over the near term.
Sizing up the chart setup, prices are testing resistance at 1629.57, the 38.2% Fibonacci retracement level, with a break higher exposing the 50% barrier at 1662.65. Near-term support lines up at 1575.64 at long-term rising trend line based from October 2008.
Daily Chart - Created Using FXCM Marketscope 2.0
Spot Silver (NY Close): $2 9 . 36 // +0 . 18 // +0 . 61 %
Silver prices are being pulled in opposing forces as the US jobs report approaches. On one hand, a pickup in employment growth is likely to weigh on QE3 expectations and pressure silver lower amid waning demand for store-of-value alternatives to fiat currency. On the other, firming risk appetite likely in the wake of the data release will probably put pressure on the safe-haven US Dollar, offering silver a de-facto boost given the metal’s prices are denominated in terms of the benchmark unit. The dominant range is defined between support at 28.41 and resistance at 29.79.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com
To contact Ilya , e-mail ispivak@dailyfx.com . Follow me on Twitter at @IlyaSpivak
To be added to Ilya 's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com
DailyFX provides forex news on the economic reports and political events that influence the currency market.
06 January 2012 09:55 GMT
Talking Points
The US Dollar (ticker: USDollar ) continued to push higher overnight as Eurozone debt crisis fears weighed on Asian stock exchanges fell, stocking demand for the go-to safe haven currency. The MSCI Asia Pacific regional benchmark equity index lost 1.3 percent while the greenback gained as much as 0.2 percent having posted its strongest daily advance in nearly a month yesterday. The sentiment-linked Australian Dollar bore the brunt of the selloff – down as much as 0.6 percent against its US namesake.
Looking ahead, a lull in Eurozone debt crisis news shifts the spotlight to the outlook for global economic growth and the US Employment report. Expectations call for nonfarm payrolls to rise 155,000 in December, marking the largest jobs increase in three months. Absent an unexpected gloomy headline out of the currency bloc – such as the downgrade of a major European country like France, for example – this seems likely to boost risk appetite on hopes an accelerating recovery in the US will help offset the global economic slowdown expected this year. Such an outcome bodes ill for the safe-haven US Dollar against the stocks-correlated majors into the week-end, meaning the commodity bloc currency is likely to outperform while the Euro and the British Pound trail behind.
On the data front, German Factory Orders headline the docket in European hours. Expectations call for orders to fall 1.2 percent in the year through November, marketing the first negative reading in 25 months. The foreign demand component of the report ought to most interesting as traders gauge whether Euro weakness is helping to grow external demand, partially mitigating homegrown headwinds facing the Eurozone’s largest economy and the currency bloc at large.
Euro Zone Retail Sales are also on tap, with consensus forecasts pointing to the seventh consecutive month of contraction on the yearly reading. On balance, neither outcome offers anything particularly actionable in the immediate term and ought to pass with relatively little fanfare as the US jobs report looms ahead. Swiss Consumer Price Index numbers round out the docket, but deepening deflation seems unlikely to meaningfully boost Franc intervention expectations at least in the near term while SNB Chairman Philipp Hildebrand battles impropriety accusations amid reports his wife bought Dollars just three weeks before the central bank announced its EURCHF floor at 1.20, sending USDCHF soaring in the process.
Asia Session : What Happened
| GMT | CCY | EVENT | ACT | EXP | PREV |
| No Data |
E uro Session: What to Expect
| GMT | CCY | EVENT | EXP | PREV | IMPACT |
| 8:00 | CHF | Foreign Currency Reserves (CHF) (DEC) | - | 229.3B | Medium |
| 8:15 | CHF | Consumer Price Index (MoM) (DEC) | -0.1% | -0.2% | Medium |
| 8:15 | CHF | Consumer Price Index (YoY) (DEC) | -0.6% | -0.5% | Medium |
| 8:15 | CHF | CPI - EU Harmonised (MoM) (DEC) | - | -0.4% | Low |
| 8:15 | CHF | CPI - EU Harmonised (YoY) (DEC) | - | -0.8% | Low |
| 10:00 | EUR | Euro-Zone Business Climate Indicator (DEC) | -0.48 | -0.44 | Low |
| 10:00 | EUR | Euro-Zone Consumer Confidence (DEC F) | -21.2 | -21.2 | Medium |
| 10:00 | EUR | Euro-Zone Economic Confidence (DEC) | 93.3 | 93.7 | Low |
| 10:00 | EUR | Euro-Zone Industrial Confidence (DEC) | -7.5 | -7.3 | Low |
| 10:00 | EUR | Euro-Zone Services Confidence (DEC) | -2.1 | -1.7 | Low |
| 10:00 | EUR | Euro-Zone Retail Sales (MoM) (NOV) | -0.4% | 0.4% | Medium |
| 10:00 | EUR | Euro-Zone Retail Sales (YoY) (NOV) | -0.9% | -0.4% | Medium |
| 10:00 | EUR | Euro-Zone Unemployment Rate (NOV) | 10.3% | 10.3% | Medium |
| 11:00 | EUR | German Factory Orders s.a. (MoM) (NOV) | -1.8% | 5.2% | Medium |
| 11:00 | EUR | German Factory Orders n.s.a. (YoY) (NOV) | -1.2% | 5.4% | Medium |
Critical Levels
| CCY | SUPPORT | RESISTANCE |
| EURUSD | 1.2660 | 1.2900 |
| GBPUSD | 1.5433 | 1.5594 |
--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com
To contact Ilya , e-mail ispivak@dailyfx.com . Follow me on Twitter at @IlyaSpivak
To be added to Ilya 's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com
DailyFX provides forex news on the economic reports and political events that influence the currency market.
06 January 2012 07:55 GMT
The euro saw heavy bearish movement throughout the day yesterday despite positive US data which typically helps the currency. Euro-zone debt worries continue to send investors away from riskier assets. Whether today's US Non-Farm Payrolls can give the euro a boost to close out the week is still unknown.
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
| Daily Trend | | | | | | |
| Weekly Trend | | | | | | |
| Resistance | 1.3000 | 1.5670 | 77.80 | 0.9560 | 1.0365 | 0.8362 |
| 1.2954 | 1.5598 | 77.61 | 0.9537 | 1.0274 | 0.8318 | |
| 1.2881 | 1.5516 | 77.37 | 0.9475 | 1.0236 | 0.8290 | |
| Support | 1.2790 | 1.5495 | 77.20 | 0.9431 | 1.0155 | 0.8246 |
| 1.2761 | 1.5436 | 76.84 | 0.9361 | 1.0081 | 0.8201 | |
| 1.2745 | 1.5363 | 76.60 | 0.9317 | 1.0012 | 0.8165 |
The US dollar had a very bullish day yesterday, following a better than expected ADP Non-Farm Payrolls figure and Unemployment Claims report. Gains were made against the euro, British pound and Japanese yen. The EUR/USD fell to an 11-month low, while the USD/JPY shot up past the 77.00 level.
The ADP figure came in at 325K, well above the forecasted 176K. The ADP report is known as an important predictor of today's Non-Farm Payrolls (NFP) figure. The NFP is widely considered the most important global economic indicator, and typically generates heavy market movements.
The NFP will measure the number of non-farm jobs added to US payrolls during the month of December. Analysts are predicting the number to come in at around 152K, which if true, would signal a sizeable increase over November's figure.
The effect the NFP has on the markets has proven to be difficult to predict. On the one hand, a positive number tends to benefit riskier currencies like the EUR, GBP and AUD. On the other hand, should the figure come in below expectations, investors may decide to shift their funds toward safe-haven assets like the USD and JPY. Traders will also want to remember that the NFP number is very difficult to predict and it is not unheard of for the end result to come in well above or below original forecasts.
The euro extended its bearish trend on Thursday, as the euro-zone debt crisis continues to drive investors away from the currency and toward safer assets like the US dollar and Japanese yen. The EUR/JPY hit a fresh 11-year low while the EUR/USD dropped to its lowest level since December 2010. The bearish movement came in despite positive US jobs data which typically benefit riskier assets like the euro.
Today, traders will want to focus on the all-important US Non-Farm Payrolls figure, set to be released at 13:30 GMT. While a positive figure is expected, traders should not count on it helping the euro close out the week on a positive note. Any further negative news out of the euro-zone will likely cause the euro to drop further, especially against currencies like the greenback and yen.
The Japanese yen saw a very mixed trading session on Thursday. Against the euro, the JPY hit an 11-year high, largely due to the on-going string of negative news regarding the euro-zone debt crisis. At the same time, positive US jobs data sent the USD/JPY soaring above the 77.00 level.
Today, the Non-Farm Payrolls figure is likely to cause heavy volatility among yen pairs. A positive figure may cause the JPY to slip against some of the riskier currencies like the aussie or British pound. Should today's news come in below expectations, traders can expect the safe-haven yen to receive a healthy boost against all of its main currency rivals.
It appears that the price of crude oil peaked yesterday right around the $103.60 a barrel level before dipping in evening trading. That being said, the price of oil is still extremely high and analysts are forecasting the commodity to remain above the $100 level as long as tensions in the Middle East continue.
Today, traders can expect the current oil trend to continue following the recent EU embargo on Iranian crude oil. Furthermore, should the US Non-Farm Payrolls figure come in as predicted, crude oil is likely to see a boost along with other commodities to close out the week.
Technical indicators are showing that the pair may see an upward correction in the near future. The Williams Percent Range on the 8-hour chart has dropped into the oversold zone, while the RSI on the daily chart has dipped below the 30 level. Traders may want to go long in their positions.
The 8-hour chart's William Percent Range recently dropped below the -80 level, indicating that possible upward movement could occur. That being said, other technical indicators are inconclusive at the moment. Traders may want to take a wait and see approach for this pair.
Most technical indicators are showing this pair in the oversold region. The Stochastic Slow on the daily chart has formed a bullish cross while the Relative Strength Index is hovering around the oversold zone. Traders may want to go long in their positions.
The daily chart's technical indicators are showing that this pair is in the overbought region and may see a bearish correction. The Williams Percent Range is currently above the -10 level, while the Relative Strength Index is at the 70 level. Traders may want to go short in their positions.
The 8-hour chart's Stochastic Slow has formed a bearish cross, while the Williams Percent Range on the daily chart is currently right around the -10 level. These are both signs that downward movement could occur in the near future. Forex traders may want to go short before the downward breach takes place.
The Euro and risk correlated assets remain under pressure heading into Friday and at this point, there appears to be no sign of any relief for these markets. Rumors of an S&P France downgrade and an incident at a North Korean nuclear facility have not helped matters, and this weighs on an already stressed situation on the global macro front, with the Eurozone economy looking increasingly fragile. The latest suggestion by Greece’s PM that the country may default in March and the leave the Eurozone has been a primary driver of Euro selling over the past few hours and disappointing EZ auction results coupled with talk of recapitalizations have added to the high degree of uncertainty in the region.
At this point, next key support for the Euro comes in by the 1.2500 area, and we could see a test of this level sooner than even we had anticipated. We are also starting to see a potential breakdown in familiar correlations where USD performance had been inversely correlated with US economic data results. Economic data has been quite solid out of the US in recent trade and the stronger results have actually been inspiring fresh USD bids. As such, we continue to be very bullish on our outlook for the US Dollar across the board, and recommend looking to fade other major currencies against the buck over the coming months. Some of these currencies include the commodity bloc currencies, highlighted by the Australian, New Zealand and Canadian Dollars.
ECONOMIC CALENDAR
TECHNICAL OUTLOOK
EUR/USD : After finally taking out the 2011 lows from January by 1.2870, the market seems poised for the next major downside extension. Overall, we retain a strong bearish outlook for this market and look for setbacks to extend towards the 1.2000 handle over the coming months. While we would not rule out the potential for corrective rallies, any rallies should be very well capped ahead of 1.3200. Thursday’s daily close below 1.2850 could however accelerate declines towards 1.2500.
USD/JPY: Despite the latest pullbacks, we continue to hold onto our constructive outlook while the market holds above 76.55 on a daily close basis. We believe that any setbacks from here should be limited in favor of a fresh upside extension back towards 79.55 over the coming weeks. Look for a break above 78.30 to confirm and accelerate, while only a daily close below 76.55 negates and gives reason for pause.
GBP/USD: Rallies have been very well capped ahead of 1.5800 and it looks as though a lower top has now been carved out by 1.5780 ahead of the next major downside extension back towards the October lows at 1.5270. Key support comes in by 1.5360 and a daily close below this level will be required to confirm bias and accelerate declines. Ultimately, only back above 1.5780 would negate bearish outlook and give reason for pause.
USD/CHF: The recent break above the critical October highs at 0.9315 is significant and now opens the door for the next major upside extension over the coming weeks back towards parity. A confirmed higher low is now in place by 0.9065 following the recent break over 0.9330, and next key resistance comes in by 0.9785. Ultimately, only back under 0.9065 would delay constructive outlook.
--- Written by Joel Kruger, Technical Currency Strategist
To contact Joel Kruger, email jskruger@dailyfx.com . Follow me on Twitter @JoelKruger
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DailyFX provides forex news on the economic reports and political events that influence the currency market.
06 January 2012 06:33 GMT
The greenback is markedly higher at the close of North American trade with the Dow Jones FXCM Dollar Index ( Ticker: USDollar ) advancing 0.92% on the session. The gains come on the back of another lackluster performance in US equities which spent much of the session struggling to pare early losses carried over from a more substantial sell-off in European markets. Helping support stocks was a much stronger than expected print on the ADP employment report which showed the US created 325K jobs in December. The data nearly doubled consensus estimates which had called for a print of just 178K. By the close of trade, the S&P and the NASDAQ were higher by 0.29% and 0.81% respectively, while the Dow was slightly weaker, off by just 0.02% on the session.
The dollar pulled further away from the key Fibonacci support level we have continued to cite since the start of the year at 9850. The index breached the 61.8% Fibonacci extension taken from the August 1 st and October 27 th troughs at 9950 before losing steam just ahead of the psychological 10,000 level. The RSI reversal noted yesterday has continued to support our bias with the oscillator crossing back above the 50-level as the slope steepens further.
An hourly chart shows the index struggling to test the 10,000 level just ahead of the close in New York. A breach here eyes subsequent resistance targets at 10,040 and the 76.4% Fibonacci extension at 10,070. The level has continued to provide strong resistance for the reserve currency with the index failing four breach attempts late last year. Interim support now rests at the 61.8% extension at 9950 backed by 9912 and the 50% extension at 9850.
The greenback advanced against all four component currencies highlighted by a 1.16% advance against the euro which moved nearly 147% of its daily average true range. Reports out of Europe continue to suggest that the Germans remain steadfast in the opposition to the expansion of the bail-out fund with yields on French debt continuing to rise despite decent demand at a bond auction earlier today. The euro fell to its lowest levels since September 2010 as ongoing concerns about the deepening debt crisis weighed on demand for the single currency. It comes as no surprise that the Japanese yen once again is the top performer of the lot although dollar advances continue to outpace those of the low yielder. The yen did appreciate against all its other major counter parts as it continues to benefit from haven demand during risk-off environments. Having said that, advances against the greenback will remain tempered on concerns over further currency intervention form Japanese officials.
Tomorrow’s economic calendar carries significant event risk with the non-farm payroll report and the unemployment rate highlighting the docket. Consensus estimates call for the creation of 150K jobs for the month of December while the unemployment rate is expected to up-tick to 8.7%. Today’s blowout ADP print may have set higher expectations for tomorrow’s data although in the past we have seen the report act as a poor indicator for the more encompassing NFP print. Despite the expected rise in the unemployment rate, tomorrow’s data should reinforce recent reports suggesting that the economy is indeed on proper footing. We continue to see a slight decoupling in the dollar / equities correlation which should become more pronounced later this year. Look for the dollar to take cues from the release with a move back into risk-assets likely to halt the dollar’s advance for now.
Upcoming Events
| Date | GMT | Importance | Release | Expected | Prior |
| 1/6 | 13:30 | HIGH | Change in Non-Farm Payrolls (DEC) | 150K | 120K |
| 1/6 | 13:30 | HIGH | Unemployment Rate (DEC) | 8.7% | 8.6% |
| 1/6 | 13:30 | MDEIUM | Change in Manufacturing Payrolls (DEC) | 6K | 2K |
| 1/6 | 13:30 | MEDIUM | Average Hourly Earnings (MoM) (DEC) | 0.2% | -0.1% |
| 1/6 | 13:30 | MEDIUM | Average Hourly Earnings (YoY) (DEC) | 2.1% | 1.8% |
| 1/6 | 13:30 | MEDIUM | Underemployment Rate (U6) (DEC) | - | 15.6% |
| 1/6 | 13:30 | LOW | Average Weekly Hours (DEC) | 34.3 | 34.3 |
| 1/6 | 13:30 | LOW | Change in Household Survey (DEC) | - | 278 |
--- Written by Michael Boutros, Currency Analyst with DailyFX.com
To contact Michael email mboutros@dailyfx.com or follow him on Twitter @MBForex .
To be added to Michael’s email distribution list, send an email with subject line “Distribution List” to mboutros@dailyfx.com
DailyFX provides forex news on the economic reports and political events that influence the currency market.
05 January 2012 22:01 GMT
The start of the week saw risk assets outperform as US data continues to top estimates with stocks and higher yielding assets advancing across the board. The situation in Europe has continued to deteriorate however with remarks made by senior officials suggesting that the Germans remain steadfast in their opposition to expanding the European bail-out fund. While the euro trade remains increasingly crowded, we will attempt to focus on the highest yielding currency among the majors as gauge of broader markets sentiment. Although there are numerous scalps we are currently watching, the Australian dollar remains our setup of choice as we look for the aussie to pare the 1.75% advance seen in the first three trading sessions of 2012.
AUD/USD Scalp Setup
The AUD/USD has continued to trade within the confines of a descending channel formation dating back to November third when the aussie peaked at near two month highs around 1.0385. Note that the relative strength index continues to hold below RSI trendline resistance with a breach above likely to put our setup on hold for some time. Support profit targets are eyed at 1.0240 backed by 1.0215, the 38.2% Fibonacci extension taken from the December 8 th and November 3 rd crests at 1.0188, and 1.0165. A break below our bottom limit at 1.0129 risks substantial losses for the aussie with subsequent targets held at the 50% extension at 1.0129, the 1.01-figure, and the 61.8% extension at 1.0065.
Interim resistance stands at the 23.6% extension at 1.0263 with subsequent ceilings eyed higher at the 1.03-handle, and 1.0335. A breach here negates our short-term bias with such a scenario eyeing resistance targets at the 2012 high at 1.0385 and 1.0425. An hourly average true range of 27.39 yields profit targets of 21-24 pips depending on entry. Should ATR pull back dramatically, adjust profit targets as needed to ensure more feasible scalps.
*Note that since this article was written the aussie has breached our initial topside resistance target. That said, the scalp will not be active until a break back below the 23.6% ext at 1.0263 or a rebound off the 1.03-figure or subsequent resistance level with RSI conviction. We will remain flexible with our bias with a move passed our topside limit at 1.0335 eyeing subsequent topside targets.
Key Thresholds
| Entry/Exit Targets | Timeframe | Level | Significance |
| Resistance 1 Target | 30min | 1.0263 | 23.6% Fibonacci Ext |
| Resistance 2 Target | 30min | 1.0300 | Basic Resistance |
| Topside Limit | 30min | 1.0335 | Soft Resistance |
| Topside Limit Break-Target | 30min | 1.0385 | 2012 High / Resistance |
| Topside Limit Extended Break- Target | 30min | 1.0425 | Soft Resistance |
| Support 1 Target | 30min | 1.0240 | Soft Support |
| Support 2 Target | 30min | 1.0215 | Basic Support |
| Support 3 Target | 30min | 1.0188 | 38.2% Fibonacci Ext |
| Support 4 Target | 30min | 1.0165 | Soft Support |
| Bottom Limit | 30min | 1.0129 | 50% Fibonacci Ext |
| Bottom Limit Break-Target | 30min | 1.0100 | Soft Support |
| Bottom Limit Extended Break- Target | 30min | 1.0065 | 61.8% Fibonacci Ext |
| Average True Range | 1hour | 27.39 | Profit Targets 21-24 pips |
With no data on tap for Australia for the remainder of the week we highlight the much anticipated non-farm payroll report on tap for tomorrow. Consensus estimates call for a print of 155K for the month of December, up from a previous gain of 120K. With today’s ADP employment report crushing estimates with a print of 325K, expectations for a strong NFP report continue to take root. As I mentioned in previous reports this week, we look for the greenback to decouple from its negative correlation with equity markets later this year. As it stands however, a strong print tomorrow could fuel a rally in risk with such a scenario likely to see the aussie move against our bias.
--- Written by Michael Boutros, Currency Analyst with DailyFX.com
To contact Michael email mboutros@dailyfx.com or follow him on Twitter @MBForex for updates on this scalp and other trades .
To be added to Michael’s email distribution list, send an email with subject line “Distribution List” to mboutros@dailyfx.com
DailyFX provides forex news on the economic reports and political events that influence the currency market.
05 January 2012 19:02 GMT
Following the sharp gains recorded on the first business day of 2012 for both gold and silver, gold continued to rise while silver changed direction and moderately declined. The Euro also depreciated against the US dollar. France plans to sell today as much as €8 billion worth of debt. If this debt sale won't go well, it could also have an adverse effect of the Euro. Today, the Euro Area Industrial New Orders report will be published, ADP's estimate of U.S. non-farm employment, U.S. ISM Non-Manufacturing PMI and U.S. Unemployment Claims report.
Gold rose on Wednesday by 0.76% to $1,612.7 ; silver on the other hand declined by 1.61% to reach $29.10. In the chart below are the normalized gold and silver during recent weeks (normalized gold and silver to December 14 th 2011). During January gold increased by 2.9% and silver by 4.2%.
St. Deviation Gold and Silver
Despite the sharp changes in gold and silver throughout recent weeks, their daily percent changes' standard deviations didn't increase compared with their standard deviations in previous months and are well below the high standard deviations recorded back in September when gold and silver sharply declined.
Euro Area Inflation Declined to 2.8% December
According to the recent Eurostat report the Euro Area inflation rate slightly slipped by 0.2 percent points to reach an annual inflation rate of 3% in December 2011.
This decline comes despite the recent cuts in the ECB's interest rates . The Euro is currently traded down. The Employment in the EU is also down by 0.1% during the third quarter of 2011. These reports may have been among the factors to adversely affect the Euro yesterday, as these reports suggest that the economic progress of the EU is slowing down, and thus this news may have curbed the recent rally of bullion prices.
On Today's Agenda
U.S. Unemployment Claims: initial claims rose by 15,000 to 381,000 claims for the week ending on December 24 th ; the number of insured unemployment inclined by 34k to 3.601 million during the week of December 17 th ;
U.S. ISM Non-Manufacturing PMI: This report will show the development of non-manufacturing sector during December 2011. During November this index slightly fell to 52%; this index might affect forex and commodities traders ( see here last report ).
Forex / Gold & Silver– January
The Euro/USD changed direction and sharp decreased by 0.82% to reach 1.2944; other currencies such as CAD also depreciated against the USD. If major currencies will continue to depreciate against the USD, it may also pressure down gold and silver.
Gold and Silver Outlook
Gold continued to trade up in January and even though silver declined yesterday, it is still well above its initial price level. I speculate that if the "risk currencies" including the AUD and Euro will start to depreciate against the US dollar, it may pull down gold and silver. Furthermore, if the upcoming U.S. reports will show an improvement it might help appreciating the US dollar and consequently pressuring down precious metals. Finally if the upcoming French debt sales won't go well, it could have a negative effect on the Euro, which in turn may also pressure down gold and silver.
For further reading:
Gold and Silver Prices Outlook for January 2012
Weekly Outlook for 2-6 January
Get the recent gold and silver outlook report for free! Just sign up to the Trading NRG newsletter.
By: Lior Cohen, Energy Analyst for Trading NRG
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DailyFX provides forex news on the economic reports and political events that influence the currency market.
05 January 2012 15:23 GMT
