First net decrease in U.S. payrolls pushes Dollar down to 15-year low, which might lead the Fed to an unusually large rate cut as soon as this month. Asian equities also dropped, triggering investors to sell high-yielding assets and in turn boosting the Yen.
News and Events:
The U.S. released surprisingly weak employment numbers for August: Non-farm payrolls fell 4,000 (vs. 110,000 expected), the first decline in four years.
Investors have pushed down the U.S. dollar back into it’s downtrend; the U.S. Dollar Index, the currency’s trade-weighted index against six major currencies, hit a low of 79.83, the lowest value since September 1992. Analysts and investors alike believe that the Federal Reserve Bank will almost definitely cut rates as soon as this month from the current 5.25% to help lift the strain off the credit markets and restore confidence among banks. The U.S. housing problems have had a greater effect on the broader economy than originally thought, which might lead the Fed to an unusually large rate cut, possibly 50 basis points vs. the traditional 25bp increment.
The U.S. jobs report also caused Asian equities to drop and triggered investors to sell high-yielding assets, and in turn boosting the Yen. The USDJPY dropped to a low of 112.60 and the GBPJPY to 228.27 in early trading today.
Today’s Key Issues (time in GMT):
08:00 EUR Italian Gross Domestic Product, (QoQ) (2Q F)
08:00 EUR Italian Gross Domestic Product,(YoY) (2Q F)
08:00 EUR Italian Private Consumption (2Q)
08:00 EUR Italian Government Spending (2Q)
08:00 EUR Italian Total Investments (2Q)
08:00 EUR Italian Exports (2Q)
08:00 EUR Italian Imports (2Q)
08:30 EUR Sentix Investor Confidence (SEP)
08:30 GBP Producer Price Index - Input, sa (MoM) (AUG)
08:30 GBP Producer Price Index - Input, nsa (YoY) (AUG)
08:30 GBP Producer Price Index - Output, nsa (MoM) (AUG)
08:30 GBP Producer Price Index - Output, nsa (YoY) (AUG)
08:30 GBP Producer Price Index Output Core, sa (MoM) (AUG)
08:30 GBP Producer Price Index Output Core, nsa (YoY) (AUG)
08:30 GBP DCLG UK House Prices (YoY) (JUL)
12:30 USD Fed’s Lockhart Speaks on U.S. Economic Outlook
15:00 USD Fed’s Yellen Speaks
17:00 USD Fed’s Fisher Speaks
17:00 USD Treasury’s Swagel Testifies at House Subcommittee Hearing
19:00 USD Consumer Credit (JUL)
The Risk Today:
EurUsd blasted through the 78.6% retracement level at 1.3735 and settled at 1.3775 last week. Look for a 100% retracement to 1.3842, the all-time high with an eye for the psychological 1.40 handle. On the downside, there are no obstacles back down to 1.3666 and then 1.3608, the former 50% retracement level.
GbpUsd holding steady at the 61.8% retracement level of 2.0273. Should it’s behavior mimic that of the Euro, we eye a short-term target of 2.0465, a strong resistance. On the downside, 2.0156 holds as the first support with strong support down to the lower trend-line at 2.0070.
UsdJpy has clearly eyed it’s previous low of 111.58, hitting 112.60 in early trading today. Look either for a bounce back to 114.57 which will open the door back to 115.50, or, a slam down through 111.58, after which 109.00 will be the major target to hit, the May 17th, 2006 low.
UsdChf still hovering between upper and lower trend-lines of the triangle, this pair will break out with a vengeance very soon. Look either for a break down through 1.1800 to be short, or 1.2145 to be long.
Resistance and Support:
By James Brandt - ACM Advanced Currency Markets, Geneva, Switzerland