The ADP Nonfarm Employment Change was released yesterday, showing a figure of 38K which is far below the expected 82K. As the ADP Nonfarm Employment Change is a statistical indicator, its potential to forecast the real value is limited. For the real value of Nonfarm Employment Change tomorrow a value of 110K is expected, even above the previous value of 92K. if the NFP release tomorrow does not live up to the expectations, there might be a further weakening move for the greenback.
Today is an eventful day in the international Forex markets with the main event being the ECB interest rate announcement. In the US markets the ISM Non-Manufacturing Index will be released and the Fed’s Governor Kroszner will speak at 15:30 GMT. The ISM Non-Manufacturing Index is expected to be released at 54.5 which is slightly below the previous value of 55.8. Kroszer’s speech will be closely watched because investors could get some hints on the future interest rate decision which still hangs in balance. There are three more news releases with less importance coming from the US today which are the Nonfarm Productivity, Unit Labor Costs, and Building Permits, that might cause some price movement, but will not be able to draw trader’s attention from the ISM release.
After the USD weakened yesterday, the expected news tomorrow and today will be important to determine if the US sub-prime crisis is limited to the housing sector or if it indeed affected the broader economy. If so this would increase the possibility of a rate cut by the Fed at their next meeting. A weaker than expected ISM Non-Manufacturing Index as well as anxious words in Fed Governor Kroszer’s speech on “Analyzing and Assessing Financial Crises” could potentially depress the USD today.
Today is packed with news releases relevant to forex trading from the Euro-zone. In Great Britain the Industrial Production is expected to be released at 0.2% compared to a previous release of 0.1%. Manufacturing Production is expected to be released at 0.2% as in the previous month and the BOE will announce its interest rate which is expected to remain unchanged at 5.75%.
The ECB will also announce its interest rate today which is expected to be left at 4.0%. The ECB intends to wait a little longer before changing the interest rate, in order to monitor the consequences of the sub prime crisis and the effects of the liquidity injections. Of particular concern is the impact of the US credit crisis on the German financial system, as Germany is Europe’s largest economy.
The ECB interest rate and the following speech by ECB President Trichet will be important for investors to follow as the market might experience some stability and a reduced risk aversion on the side of the investors. If all news will release align with expectations we could even see a little strengthening of the EUR, depending on how confident President Trichet portrays the European economical outlook.
The JPY gained ground yesterday all across the board as the weak release of the ADP Nonfarm Employment Change once again increases risk aversion in the markets. In this risk averse situation, carry trades will be constrained and the market will have to wait until carry trades will work on full speed again. Although the JPY is not trading at the high levels it saw two weeks ago, it is still floating in a relatively tight range, and a clear signal that the carry trades are back to normal course has not yet been accepted.
With no market moving news releases from Japan for today, the JPY will react on the market’s accommodation to the economical releases in the US and Europe.
The pair is floating in a relatively tight range for several days now, as can be seen on the 4 Hour chart. No significant break through the 1.3550/1.3700 range has occurred, and the hourlies continue to deliver mixed signals. The daily chart is giving a moderately bullish sentiment with a bit more room to run.
The cable is in the middle of an uptrend that started at 1.9650, and according to the daily chart still has some more momentum to continue. The slow stochastic on the 4 Hour chart is showing a bearish cross indicating that there could be a correction move before the uptrend continues.
The hourly studies show that there is a bearish configuration on the 4 and 1 Hour charts due to a bearish cross on the slow stochastic and RSI that is floating at the 50 level. The daily chart on the other hand is showing a slight bullish momentum, which indicates that buying on dips might be preferable today.
After losing 100 pips yesterday, the pair is in consolidation at the 1.2040 level. The 4 Hour chart is showing bearish sentiment, and is supported by an extremely bearish daily study. Next target should be a breach through the 1.2000 level.
[B]The Wild Card
Over the past two weeks there is an extremely accurate upwards channel forming on the 4 Hour chart. Oil has made a significant move and is displaying a healthy consistent move up with plenty of room to run. The next significant resistance level is around 78.50 which provide Forex traders with a great opportunity to jump in to this massive uptrend with large momentum still steaming.