08/10/'07 - The Greenback Sailing Quiet Waters, Columbus Day Halts US Markets

[B]Economic News

USD [/B]

Last week’s much anticipated U.S Jobs Report didn’t bring much relief for the greenback. The USD rose sharply on last Friday, after the Nonfarm Payrolls data showed September U.S. jobs growth of 110K. However, the initially strong rally of better-than-forecasted NFP figures turned into a similarly sharp sell-off for the USD. Since then, the greenback has stabilized and has been trading around the 1.41 level against the EUR. Last Friday’s Average Hourly Earnings index released at 0.4% beating expectations of 0.3%. In fact, the latest string of the better-then-expected U.S data is reducing the probability of further possible Federal Reserve interest rate cuts. Now speculators forecast that the Fed will only cut rates by 25 basis points throughout December.

Also on Friday, the Canadian Unemployment Rate released at the lowest rate in 33 years. The Canadian Employment Change index released at 51.1K beating expectations of 16.5K. As a result, the USD has tumbled to a record low against the CAD, falling 1.5% to the 0.9816 level, the biggest drop in 3 years.

Today the U.S financial markets will be closed due to Columbus Day. Low liquidity is expected during the New York session and the USD should continue to range trade at its low levels. During the rest of the week, there is no real market moving news expected from the U.S markets except on Friday, where the US Retail Sales along with the Consumer’s Sentiment are due to be released. Looking forward this month, the focus in the market has shifted to an upcoming meeting of finance ministers and central bankers from the Group of Seven rich nations and a Fed policy meeting at the end of the month. As a whole no ground breaking movements are expected to happen this week.


Last Friday’s relatively strong U.S Nonfarm Payrolls data sent the EUR substantively lower against the USD, hitting fresh multi-week low of $1.4032. It didn’t take much time for the pair to snap back to earlier levels, indicating the resilience of the EUR as it remained robust throughout the most important news releases of the month. Today, due to the fact the US and Japanese markets are closed, most of the movement will probably emanate from the small amount of news that is expected from Europe. The European morning will start with ECB President Trichet’s speech at the breakfast meeting organized by the European Policy Centre, in Brussels. Trichet will mostly discuss future considerations of an interest rate adjustment.

The following releases are expected to come out of the UK today, kicking off with the UK PPI Output and Input figures. The PPI Input is expected to be released at 1.4% which is much higher than last month’s -0.5%. The UK PPI Output is also expected to come a bit higher than last month on 0.2% and a previous figure of 0.1%. The second release will be the UK Industrial Production which is expected to rise from a negative territory of -0.1% to positive levels of 0.3%. Other than that it appears that today will be relatively quiet and the entire trading day is expected to be characterized by low liquidity all across the board.


Last week, the JPY was the only major currency to decline against the USD almost on a daily basis. On Friday the USD rose 0.3%, to a fresh record high of 116.85 vs. the JPY, making it the biggest weekly loss against the USD in more than a year. The Japanese currency has also fallen for the 4th straight week vs. the EUR, losing 0.9% to 165.40. Since the end of the previous week, the JPY continued to lose ground as investors increased Carry Trades under the notion that Asian equities will follow U.S. stocks higher. Currently the JPY is trading around the 117.00 level against the USD and 165.50 against the EUR. Today will be quite a thin trading session for the JPY as there is no news expected from Japanese markets. Later this week, the JPY Interest Rate Announcement will be closely watched, although no change in rate is expected. Therefore, most price movement on the JPY pegged currencies will be derived mainly from European and American markets.

[B]Technical News


The pair is in stable consolidation around 1.4120 and as the Bollinger bands are getting tighter the next move is getting closer. There is a bearish cross forming on the 4 Hour chart, indicating that the next break will probably be bearish. The daily charts are quite neutral, as traders should look for entry point on the hourly level.


The cable is in the midst of a moderate uptrend which seems to be in a halt. The hourly charts are giving no distinct signals, and the dailies are floating on neutral ground. It would be preferable to stay out for the moment and wait for a clear signal on the 4 Hour chart be fore placing an order.


There is a solid channel forming on the 4 Hour chart as the pair now floats on the bottom barrier. The slow stochastic and RSI are showing that the bullish momentum is still strong, and that the next target price might be 117.80.


The pair is still in the middle of the correction move initiated in 1.1620 and it appears to continue with full steam. The daily slow stochastic is signaling that there is still more room to run. The hourlies are supporting the bullish notion as the RSI is floating around the 50 area, which means that the trend is nowhere near over. The next target price might be 1.1840.

[B]The Wild Card

Crude Oil [/B]

There has been a bearish breach through the bottom barrier of the upwards channel. The breach indicates that the correction move will be equal to the channel’s width. The oil has completed the correction move, and the daily study show that the main uptrend will probably resume shortly. This is a great opportunity for Forex traders to jump back onto the uptrend at a relatively low price.