Mid-Day Report: Indecisive Market after NFP
Non-Farm payroll showed the third consecutive month of contraction in the US job markets by falling -80k in march, even worse than expectation of -50k. Even worse than that, Feb's data was revised down from -63k to -76k, Jan's data was revised sharply lower from -22k to -76k. That adds up to a total of -232k contraction in the employment market in Q1. Unemployment rate, on the other hand, surged sharply from 4.8% to 5.1%, even higher than expectation of 5.0%. The deteriorating job market provides incontrovertible proof of recession in the US economy.
Market's reaction to today's NFP is indecisive so far. Dollar spikes lower right after the release but quickly recovers, in particular against Sterling. The Japanese yen also surges on risk aversion. As dust settles, further weakness is likely to be seen in the USD/JPY and also the USD/CHF.
Also released in US session, Canadian unemployment rate unexpectedly climbed from 5.8% to 6.0% in Mar. though the Canadian economy still recorded 14.6k job growth, similar to consensus expectation.
USD/JPY Mid-Day Outlook
Daily Pivots: (S1) 101.90; (P) 102.43; (R1) 102.78; More.
USD/JPY's retreat from 102.94 extends further in early US session and reaches as low as 102.61 so far. As discussed before, An intraday top might be in place with 4 hours MACD staying below signal line. Intraday outlook remains neutral for the moment. Below 101.49 minor support will turn intraday bias back to the downside. Further break of 98.55 support will confirm that corrective rebound from 95.77 has completed and will bring retest of this low. On the upside, decisive break of 103.59 resistance zone is needed to indicate underlying upside momentum is still strong. Otherwise, outlook will still remain neutral in case of mild rally.
In the bigger picture, as discussed before, focus is still on 103.59 cluster resistance (61.8% retracement of 108.59 to 95.77 at 103.69). As long as this resistance holds, there is no confirmation of a medium term bottom yet. USD/JPY has just broken out of multi-year triangle consolidation pattern that started in 98 at 147.68. The structure of the current fall from 124.13 argues that USD/JPY is still in the middle of a larger down trend only. Sustained trading below 95.78 will encourage further fall to next important psychological level at 90 first.
However, firm break of 103.59 cluster resistance will argue that a medium term bottom is already in place after meeting 76.4% retracement of 79.75 to 147.68 at 95.78. In such case, stronger medium term rebound should be seen to correct the whole fall from 124.13, targeting 108.59 resistance first.
USD/JPY 4 Hours Chart - Forex Newsletters, Forex Outlook, Forex Review, Forex Signal
Forex News Digest
Employers in U.S. Cut 80,000 Jobs, More Than Forecast; Jobless Rate 5.1%
Dollar Falls Against Euro as Report Shows U.S. Lost Jobs for Third Month
Australian, New Zealand Dollars Decline in Week on Signs Growth is Slowing
Dollar's Gain May Stall at 103.70 Against Yen, Mitsubishi UFJ Trust Says
Canadian Dollar Falls After March Job Growth Fails to Meet Expectations
ECB's Trichet Says Excessive Currency Volatility Is Counterproductive
Dollar Weakens on Jobs Data Report As More Investors Put Money Into Oil
Fri, 4 Apr 2008 11:32:00 GMT from Canadian Business Magazine
Oil rises over $104; eyes dollar, US demand
Fri, 4 Apr 2008 11:17:00 GMT from Reuters South Africa
More Forex News
Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
00:30 AUD Australia Retail sales M/M Feb -0.10% 0.30% 0.00% -0.10%
05:45 CHF Swiss CPI M/M Mar 0.30% 0.20% 0.10%
05:45 CHF Swiss CPI Y/Y Mar 2.60% 2.50% 2.40%
10:00 EUR Germany Factory orders M/M Feb -0.50% 0.90% -1.50% -0.70%
10:00 EUR Germany Factory orders Y/Y Feb 9.00% 6.60% 9.50% 8.90%
11:00 CAD Canada Unemployment rate Mar 6.00% 5.80% 5.80%
11:00 CAD Canada Net Change in Employment Mar 14.6K 15.0K 43.3K
12:30 USD U.S. Non-farm payrolls Mar -80K -50K -63K -76K
12:30 USD U.S. Unemployment rate Mar 5.10% 5.00% 4.80%
12:30 USD U.S. Avg. hourly earnings M/M Mar 0.30% 0.30% 0.30%
12:30 USD U.S. Avg. hourly earnings Y/Y Mar 3.60% 3.60% 3.70%
14:00 CAD Canada Ivey PMI Mar 59.5 62
taken from http://www.actionforex.com/action-insight/market-overview/mid%11day-report%3a-indecisive-market-after-nfp-2008040441167/
Jumat, 04 April 2008
Essential Elements of a Successful Trader
by Jimmy Young
EURUSDTrader
Courage Under Stressful Conditions When the Outcome is Uncertain
All the foreign exchange trading knowledge in the world is not going to help, unless you have the nerve to buy and sell currencies and put your money at risk. As with the lottery “You gotta be in it to win it”. Trust me when I say that the simple task of hitting the buy or sell key is extremely difficult to do when your own real money is put at risk.
You will feel anxiety, even fear. Here lies the moment of truth. Do you have the courage to be afraid and act anyway? When a fireman runs into a burning building I assume he is afraid but he does it anyway and achieves the desired result. Unless you can overcome or accept your fear and do it anyway, you will not be a successful trader.
However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction can become an issue – you’re overconfident and not focused enough on the risk you're taking.
Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one.
Start by analyzing yourself. Are you the type of person that can control their emotions and flawlessly execute trades, oftentimes under extremely stressful conditions? Are you the type of person who’s overconfident and prone to take more risk than they should? Before your first real trade you need to look inside yourself and get the answers. We can correct any deficiencies before they result in paralysis (not pulling the trigger) or a huge loss (overconfidence). A huge loss can prematurely end your trading career, or prolong your success until you can raise additional capital.
The difficulty doesn’t end with “pulling the trigger”. In fact what comes next is equally or perhaps more difficult. Once you are in the trade the next hurdle is staying in the trade. When trading foreign exchange you exit the trade as soon as possible after entry when it is not working. Most people who have been successful in non-trading ventures find this concept difficult to implement.
For example, real estate tycoons make their fortune riding out the bad times and selling during the boom periods. The problem with trying to adapt a 'hold on until it comes back' strategy in foreign exchange is that most of the time the currencies are in long-term persistent, directional trends and your equity will be wiped out before the currency comes back.
The other side of the coin is staying in a trade that is working. The most common pitfall is closing out a winning position without a valid reason. Once again, fear is the culprit. Your subconscious demons will be scaring you non-stop with questions like “what if news comes out and you wind up with a loss”. The reality is if news comes out in a currency that is going up, the news has a higher probability of being positive than negative (more on why that is so in a later article).
So your fear is just a baseless annoyance. Don’t try and fight the fear. Accept it. Have a laugh about it and then move on to the task at hand, which is determining an exit strategy based on actual price movement. As Garth says in Waynesworld “Live in the now man”. Worrying about what could be is irrational. Studying your chart and determining an objective exit point is reality based and rational.
Another common pitfall is closing a winning position because you are bored with it; its not moving. In Football, after a star running back breaks free for a 50-yard gain, he comes out of the game temporarily for a breather. When he reenters the game he is a serious threat to gain more yards – this is indisputable. So when your position takes a breather after a winning move, the next likely event is further gains – so why close it?
If you can be courageous under fire and strategically patient, foreign exchange trading may be for you. If you’re a natural gunslinger and reckless you will need to tone your act down a notch or two and we can help you make the necessary adjustments. If putting your money at risk makes you a nervous wreck its because you lack the knowledge base to be confident in your decision making.
Patience to Gain Knowledge through Study and Focus
Many new traders believe all you need to profitably trade foreign currencies are charts, technical indicators and a small bankroll. Most of them blow up (lose all their money) within a few weeks or months; some are initially successful and it takes as long as a year before they blow up. A tiny minority with good money management skills, patience, and a market niche go on to be successful traders. Armed with charts, technical indicators, and a small bankroll, the chance of succeeding is probably 500 to 1.
To increase your chances of success to near certainty requires knowledge; acquiring knowledge takes hard work, study, dedication and focus. Compile your knowledge base without taking any shortcuts, thereby assuring a solid foundation to build upon.
Jimmy Young
taken from : http://www.goforex.net/essential-elements.htm
EURUSDTrader
Courage Under Stressful Conditions When the Outcome is Uncertain
All the foreign exchange trading knowledge in the world is not going to help, unless you have the nerve to buy and sell currencies and put your money at risk. As with the lottery “You gotta be in it to win it”. Trust me when I say that the simple task of hitting the buy or sell key is extremely difficult to do when your own real money is put at risk.
You will feel anxiety, even fear. Here lies the moment of truth. Do you have the courage to be afraid and act anyway? When a fireman runs into a burning building I assume he is afraid but he does it anyway and achieves the desired result. Unless you can overcome or accept your fear and do it anyway, you will not be a successful trader.
However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction can become an issue – you’re overconfident and not focused enough on the risk you're taking.
Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one.
Start by analyzing yourself. Are you the type of person that can control their emotions and flawlessly execute trades, oftentimes under extremely stressful conditions? Are you the type of person who’s overconfident and prone to take more risk than they should? Before your first real trade you need to look inside yourself and get the answers. We can correct any deficiencies before they result in paralysis (not pulling the trigger) or a huge loss (overconfidence). A huge loss can prematurely end your trading career, or prolong your success until you can raise additional capital.
The difficulty doesn’t end with “pulling the trigger”. In fact what comes next is equally or perhaps more difficult. Once you are in the trade the next hurdle is staying in the trade. When trading foreign exchange you exit the trade as soon as possible after entry when it is not working. Most people who have been successful in non-trading ventures find this concept difficult to implement.
For example, real estate tycoons make their fortune riding out the bad times and selling during the boom periods. The problem with trying to adapt a 'hold on until it comes back' strategy in foreign exchange is that most of the time the currencies are in long-term persistent, directional trends and your equity will be wiped out before the currency comes back.
The other side of the coin is staying in a trade that is working. The most common pitfall is closing out a winning position without a valid reason. Once again, fear is the culprit. Your subconscious demons will be scaring you non-stop with questions like “what if news comes out and you wind up with a loss”. The reality is if news comes out in a currency that is going up, the news has a higher probability of being positive than negative (more on why that is so in a later article).
So your fear is just a baseless annoyance. Don’t try and fight the fear. Accept it. Have a laugh about it and then move on to the task at hand, which is determining an exit strategy based on actual price movement. As Garth says in Waynesworld “Live in the now man”. Worrying about what could be is irrational. Studying your chart and determining an objective exit point is reality based and rational.
Another common pitfall is closing a winning position because you are bored with it; its not moving. In Football, after a star running back breaks free for a 50-yard gain, he comes out of the game temporarily for a breather. When he reenters the game he is a serious threat to gain more yards – this is indisputable. So when your position takes a breather after a winning move, the next likely event is further gains – so why close it?
If you can be courageous under fire and strategically patient, foreign exchange trading may be for you. If you’re a natural gunslinger and reckless you will need to tone your act down a notch or two and we can help you make the necessary adjustments. If putting your money at risk makes you a nervous wreck its because you lack the knowledge base to be confident in your decision making.
Patience to Gain Knowledge through Study and Focus
Many new traders believe all you need to profitably trade foreign currencies are charts, technical indicators and a small bankroll. Most of them blow up (lose all their money) within a few weeks or months; some are initially successful and it takes as long as a year before they blow up. A tiny minority with good money management skills, patience, and a market niche go on to be successful traders. Armed with charts, technical indicators, and a small bankroll, the chance of succeeding is probably 500 to 1.
To increase your chances of success to near certainty requires knowledge; acquiring knowledge takes hard work, study, dedication and focus. Compile your knowledge base without taking any shortcuts, thereby assuring a solid foundation to build upon.
Jimmy Young
taken from : http://www.goforex.net/essential-elements.htm
Forex Market Snapshot
ntroduction
The following facts and figures relate to the foreign exchange market. Much of the information is drawn from the 2007 Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity conducted by the Bank for International Settlements (BIS) in April 2007. 54 central banks and monetary authorities participated in the survey, collecting information from approximately 1280 market participants.
Excerpt from the BIS:
"The 2007 survey shows an unprecedented rise in activity in traditional foreign exchange markets compared to 2004. Average daily turnover rose to $3.2 trillion in April 2007, an increase of 71% at current exchange rates and 65% at constant exchange rates...Against the background of low levels of financial market volatility and risk aversion, market participants point to a significant expansion in the activity of investor groups including hedge funds, which was partly facilitated by substantial growth in the use of prime brokerage, and retail investors...A marked increase in the levels of technical trading – most notably algorithmic trading – is also likely to have boosted turnover in the spot market...Transactions between reporting dealers and non-reporting financial institutions, such as hedge funds, mutual funds, pension funds and insurance companies, more than doubled between April 2004 and April 2007 and contributed more than half of the increase in aggregate turnover." - BIS
Structure
* Decentralised 'interbank' market
* Main participants: Central Banks, commercial and investment banks, hedge funds, corporations & private speculators
* The free-floating currency system began in the early 1970's and was officially ratified in 1978
* Online trading began in the mid to late 1990's
Source: BIS Triennial Survey 2007
Trading Hours
* 24 hour market
* Sunday 5pm EST through Friday 4pm EST.
* Trading begins in New Zealand, followed by Australia, Asia, the Middle East, Europe, and America
Size
* One of the largest financial markets in the world
* $3.2 trillion average daily turnover, equivalent to:
o More than 10 times the average daily turnover of global equity markets1
o More than 35 times the average daily turnover of the NYSE2
o Nearly $500 a day for every man, woman, and child on earth3
o An annual turnover more than 10 times world GDP4
* The spot market accounts for just under one-third of daily turnover
1. About $280 billion - World Federation of Exchanges aggregate 2006
2. About $87 billion - World Federation of Exchanges 2006
3. Based on world population of 6.6 billion - US Census Bureau
4. About $48 trillion - World Bank 2006.
Source: BIS Triennial Survey 2007
Major Markets
* The US & UK markets account for just over 50% of turnover
* Major markets: London, New York, Tokyo
* Trading activity is heaviest when major markets overlap5
* Nearly two-thirds of NY activity occurs in the morning hours while European markets are open6
5. The Foreign Exchange Market in the United States - NY Federal Reserve
6. The Foreign Exchange Market in the United States - NY Federal Reserve
Average Daily Turnover by Geographic Location
Source: BIS Triennial Survey 2007
Concentration in the Banking Industry
* 12 banks account for 75% of turnover in the U.K.
* 10 banks account for 75% of turnover in the U.S.
* 3 banks account for 75% of turnover in Switzerland
* 9 banks account for 75% of turnover in Japan
Source: BIS Triennial Survey 2007
Technical Analysis
Commonly used technical indicators:
* Moving averages
* RSI
* Fibonacci retracements
* Stochastics
* MACD
* Momentum
* Bollinger bands
* Pivot point
* Elliott Wave
Currencies
* The US dollar is involved in over 80% of all foreign exchange transactions, equivalent to over US$2.7 trillion per day
Currency Codes
* USD = US Dollar
* EUR = Euro
* JPY = Japanese Yen
* GBP = British Pound
* CHF = Swiss Franc
* CAD = Canadian Dollar
* AUD = Australian Dollar
* NZD = New Zealand Dollar
Average Daily Turnover by Currency
N.B. Because two currencies are involved in each transaction, the sum of the percentage shares of individual currencies totals 200% instead of 100%.
Source: BIS Triennial Survey 2007
Currency Pairs
* Majors: EUR/USD, USD/JPY, GBP/USD, USD/CHF
* Dollar bloc: USD/CAD, AUD/USD, NZD/USD
* Major crosses: EUR/JPY, EUR/GBP, EUR/CHF
Average Daily Turnover by Currency Pair
Source: BIS Triennial Survey 2007
taken from : http://www.goforex.net/forex-market-snapshot.htm
The following facts and figures relate to the foreign exchange market. Much of the information is drawn from the 2007 Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity conducted by the Bank for International Settlements (BIS) in April 2007. 54 central banks and monetary authorities participated in the survey, collecting information from approximately 1280 market participants.
Excerpt from the BIS:
"The 2007 survey shows an unprecedented rise in activity in traditional foreign exchange markets compared to 2004. Average daily turnover rose to $3.2 trillion in April 2007, an increase of 71% at current exchange rates and 65% at constant exchange rates...Against the background of low levels of financial market volatility and risk aversion, market participants point to a significant expansion in the activity of investor groups including hedge funds, which was partly facilitated by substantial growth in the use of prime brokerage, and retail investors...A marked increase in the levels of technical trading – most notably algorithmic trading – is also likely to have boosted turnover in the spot market...Transactions between reporting dealers and non-reporting financial institutions, such as hedge funds, mutual funds, pension funds and insurance companies, more than doubled between April 2004 and April 2007 and contributed more than half of the increase in aggregate turnover." - BIS
Structure
* Decentralised 'interbank' market
* Main participants: Central Banks, commercial and investment banks, hedge funds, corporations & private speculators
* The free-floating currency system began in the early 1970's and was officially ratified in 1978
* Online trading began in the mid to late 1990's
Source: BIS Triennial Survey 2007
Trading Hours
* 24 hour market
* Sunday 5pm EST through Friday 4pm EST.
* Trading begins in New Zealand, followed by Australia, Asia, the Middle East, Europe, and America
Size
* One of the largest financial markets in the world
* $3.2 trillion average daily turnover, equivalent to:
o More than 10 times the average daily turnover of global equity markets1
o More than 35 times the average daily turnover of the NYSE2
o Nearly $500 a day for every man, woman, and child on earth3
o An annual turnover more than 10 times world GDP4
* The spot market accounts for just under one-third of daily turnover
1. About $280 billion - World Federation of Exchanges aggregate 2006
2. About $87 billion - World Federation of Exchanges 2006
3. Based on world population of 6.6 billion - US Census Bureau
4. About $48 trillion - World Bank 2006.
Source: BIS Triennial Survey 2007
Major Markets
* The US & UK markets account for just over 50% of turnover
* Major markets: London, New York, Tokyo
* Trading activity is heaviest when major markets overlap5
* Nearly two-thirds of NY activity occurs in the morning hours while European markets are open6
5. The Foreign Exchange Market in the United States - NY Federal Reserve
6. The Foreign Exchange Market in the United States - NY Federal Reserve
Average Daily Turnover by Geographic Location
Source: BIS Triennial Survey 2007
Concentration in the Banking Industry
* 12 banks account for 75% of turnover in the U.K.
* 10 banks account for 75% of turnover in the U.S.
* 3 banks account for 75% of turnover in Switzerland
* 9 banks account for 75% of turnover in Japan
Source: BIS Triennial Survey 2007
Technical Analysis
Commonly used technical indicators:
* Moving averages
* RSI
* Fibonacci retracements
* Stochastics
* MACD
* Momentum
* Bollinger bands
* Pivot point
* Elliott Wave
Currencies
* The US dollar is involved in over 80% of all foreign exchange transactions, equivalent to over US$2.7 trillion per day
Currency Codes
* USD = US Dollar
* EUR = Euro
* JPY = Japanese Yen
* GBP = British Pound
* CHF = Swiss Franc
* CAD = Canadian Dollar
* AUD = Australian Dollar
* NZD = New Zealand Dollar
Average Daily Turnover by Currency
N.B. Because two currencies are involved in each transaction, the sum of the percentage shares of individual currencies totals 200% instead of 100%.
Source: BIS Triennial Survey 2007
Currency Pairs
* Majors: EUR/USD, USD/JPY, GBP/USD, USD/CHF
* Dollar bloc: USD/CAD, AUD/USD, NZD/USD
* Major crosses: EUR/JPY, EUR/GBP, EUR/CHF
Average Daily Turnover by Currency Pair
Source: BIS Triennial Survey 2007
taken from : http://www.goforex.net/forex-market-snapshot.htm
Forex Video - US Dollar Dips As NFPs Post Worst Reading in 5 Years, BOE Could Weigh on GBP/USD Next Week
Written by Terri Belkas and John Kicklighter, Currency Analysts
US dollar ends day slightly lower against the euro and yen as US non-farm payrolls disappoint.
· Big event risk looms next week from BOE, ECB rate decision on Thursday, US calendar relatively thin.
Stories to watch on DailyFX
· What did the US non-farm payrolls report tell us? Check out our NFP Instant Insight
· Carry trades remain at risk, and according to Technical Strategist Jamie Saettele, the EUR/JPY Decline is Far From Over
We love feedback! Send any comments or suggestions to tbelkas@dailyfx.com or jkicklighter@dailyfx.com
from : http://www.dailyfx.com/story/special_report/special_reports/Forex_Video___US_Dollar_1207345620096.html
US dollar ends day slightly lower against the euro and yen as US non-farm payrolls disappoint.
· Big event risk looms next week from BOE, ECB rate decision on Thursday, US calendar relatively thin.
Stories to watch on DailyFX
· What did the US non-farm payrolls report tell us? Check out our NFP Instant Insight
· Carry trades remain at risk, and according to Technical Strategist Jamie Saettele, the EUR/JPY Decline is Far From Over
We love feedback! Send any comments or suggestions to tbelkas@dailyfx.com or jkicklighter@dailyfx.com
from : http://www.dailyfx.com/story/special_report/special_reports/Forex_Video___US_Dollar_1207345620096.html
US Dollar Remains Soft as US Labor Markets Deteriorate
Written by Terri Belkas and David Song, DailyFX.com
Downward pressures for the US dollar flared as fresh employment data amplified recessionary concerns, and spurred many investors to dump their holding of the troublesome currency. The US dollar took the biggest plunge against the Australian dollar as the currency rose above the 0.92 mark, and was followed by the New Zealand dollar as commodity prices gained. The US dollar also faltered against the lower yielding Yen as risk adverse investors pulled out of higher yielding assets, and added more losses against the Swiss franc as rising inflationary pressures stirred bets of a future rate hike by the Swiss National Bank. Against the European currencies, the US dollar weakened against the euro to bring the pair back above 1.57, while it appreciated against the British pound as market participants bet on a 25bp rate cut by the Bank of England next week. Meanwhile, the greenback picked up its biggest gains against the Canadian dollar as many investors speculate that the US slowdown will have negative implications for the Canadian economy.
The economic outlook for the US grows increasingly dim as employment situations worsen, with mounting fears that the US recession may drag out longer than expected. Job creation in the US declined for the third consecutive month as Nonfarm Payrolls fell to minus 80K from minus 76K – marking the biggest decline in five years. Manufacturing Payrolls added to the grim outlook as the index fell to minus 48K from minus 46K. Unemployment also spurred downside risks for the economy as it rose to 5.1 percent from 4.8 percent, and heightening the bearish sentiment for the economy.
Stock market investors showed surprising resilience as the rode out the mixed price actions, with the markets ending the week on a better note as it marked a weekly gain. As a result, the DJIA swayed back and forth throughout the session, but ended 16.61 points lower at 12,609.42, with GM and Verizon taking the biggest hit out of the big 30. However, the broader S&P500 rose 1.09 points to 1,370.40 points, with 116 stocks hitting a new 52 week high.
Mounting downside risk eroded the demand for high risk/reward investments, and led US Treasuries to advance as risk adverse investors moved into the safe have of risk free bond. As a result, the benchmark 10-Year yield dropped to 3.470 percent from 3.581 percent, while the 2-Year yield plunged to 1.827 percent from 1.887 percent.
Looking ahead, next week will bring an eventful week as three major central banks - Bank of Japan, European Central Bank, and the Bank of England – will meet to set their monetary policy, with the Fed’s Fisher speaking on the economy later in the week. For Monday, we do not expected major price actions as the Consumer Credit index is the only US data to be released, but expected to see US dollar volatility to picked up on Tuesday as the FOMC will release their Minutes report at 18:00GMT.
Downward pressures for the US dollar flared as fresh employment data amplified recessionary concerns, and spurred many investors to dump their holding of the troublesome currency. The US dollar took the biggest plunge against the Australian dollar as the currency rose above the 0.92 mark, and was followed by the New Zealand dollar as commodity prices gained. The US dollar also faltered against the lower yielding Yen as risk adverse investors pulled out of higher yielding assets, and added more losses against the Swiss franc as rising inflationary pressures stirred bets of a future rate hike by the Swiss National Bank. Against the European currencies, the US dollar weakened against the euro to bring the pair back above 1.57, while it appreciated against the British pound as market participants bet on a 25bp rate cut by the Bank of England next week. Meanwhile, the greenback picked up its biggest gains against the Canadian dollar as many investors speculate that the US slowdown will have negative implications for the Canadian economy.
The economic outlook for the US grows increasingly dim as employment situations worsen, with mounting fears that the US recession may drag out longer than expected. Job creation in the US declined for the third consecutive month as Nonfarm Payrolls fell to minus 80K from minus 76K – marking the biggest decline in five years. Manufacturing Payrolls added to the grim outlook as the index fell to minus 48K from minus 46K. Unemployment also spurred downside risks for the economy as it rose to 5.1 percent from 4.8 percent, and heightening the bearish sentiment for the economy.
Stock market investors showed surprising resilience as the rode out the mixed price actions, with the markets ending the week on a better note as it marked a weekly gain. As a result, the DJIA swayed back and forth throughout the session, but ended 16.61 points lower at 12,609.42, with GM and Verizon taking the biggest hit out of the big 30. However, the broader S&P500 rose 1.09 points to 1,370.40 points, with 116 stocks hitting a new 52 week high.
Mounting downside risk eroded the demand for high risk/reward investments, and led US Treasuries to advance as risk adverse investors moved into the safe have of risk free bond. As a result, the benchmark 10-Year yield dropped to 3.470 percent from 3.581 percent, while the 2-Year yield plunged to 1.827 percent from 1.887 percent.
Looking ahead, next week will bring an eventful week as three major central banks - Bank of Japan, European Central Bank, and the Bank of England – will meet to set their monetary policy, with the Fed’s Fisher speaking on the economy later in the week. For Monday, we do not expected major price actions as the Consumer Credit index is the only US data to be released, but expected to see US dollar volatility to picked up on Tuesday as the FOMC will release their Minutes report at 18:00GMT.
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