Reseña

DAILY MARKET MORNING REVIEW

February 5, 2010
2:30 a.m. GMT

CURRENCIES:
 

EUR/USD: On Thursday, the euro traded in a range of 1.3723 to 1.3903, and has traded in a range of 1.3669 to 1.3746 so far today. Short term support lies at 1.3669 with resistance at 1.4026. German industrial production and the U.S. nonfarm payrolls data will all attract attention on Friday.

GBP/USD: On Thursday, cable traded in a range of 1.5732 to 1.5919, and has traded in a range of 1.5727 to 1.5776 today. Short term resistance lies at 1.6179 with support at 1.5727. Cable traders will focus on the UK PPI data and the U.S. nonfarm payrolls report on Friday.

EUR/GBP: On Thursday, the EUR/GBP traded in a range of 0.87078 to 0.87590, and has traded in a range of 0.86872 to 0.87173 today. Short term resistance lies at 0.87695 with support at 0.86301.

USD/JPY: On Thursday, the USD/JPY traded in a range of 88.56 to 91.08, and has traded in a range of 88.89 to 89.74 today. Short term resistance lies at 91.28 with support at 88.56.

AUD/USD: On Thursday, the AUD/USD traded in a range of 0.8608 to 0.8830, and has traded in a range of 0.8643 to 0.8693 today. Short term resistance lies at 0.8962 with support at 0.8608.

NZD/USD: On Thursday, the NZD/USD traded in a range of 0.6845 to 0.7027, and has traded in a range of 0.6856 to 0.6892 today. Short term resistance lies at 0.7151 with support at 0.6845.

USD/CAD: On Thursday, the USD/CAD traded in a range of 1.0598 to 1.0753, and has traded in a range of 1.0717 to 1.0745 today. Short term resistance lies at 1.0753 with support at 1.0546. The Canadian and U.S. employment reports will be in focus on Friday.

EUR/JPY: On Thursday, the EUR/JPY traded in a range of 121.59 to 126.47, and has traded in a range of 122.01 to 123.19 so far today. Short term resistance lies at 126.98 with support at 121.59.

COMMODITIES:

Gold: On Thursday, gold traded in a range of $1059.30 to $1111.22. After markets opened in Asia on Thursday evening EST, the commodity has traded in a range of $1061.20 to $1068.95. There is short term support at $1059.30 and resistance at $1125.13.

Silver: On Thursday, silver traded in a $15.1850 to $16.410 range, and is currently trading in a $15.2250 to $15.3725 range. Support lies at $15.1850 with resistance at $16.9387.

Crude: On Thursday, NYMEX crude oil futures traded in a range of $72.42 to $77.17 and have traded in a range of $72.81 to $73.39 on Thursday evening EST. Short-term support lies at $72.42 with resistance at $78.04.

HEADLINE:

The U.S. benchmark employment report for January, nonfarm payrolls, will undoubtedly dominate Friday’s session. However, a number of other releases offer trading opportunities, including UK PPI data, German industrial production, and Canadian employment.

The first release will be the UK’s producer price index (PPI) data for January. Unveiled at 4:30 a.m. EST, headline output PPI (non-seasonally adjusted) is expected to rise an annualized 3.7%, a faster pace than its 3.5% gain previously.

Meanwhile, core output producer prices (again, non-seasonally adjusted) are forecast to rise 2.6% year-over-year, mirroring their previous rate.

In theory, a faster-than-expected rise in PPI should strengthen the pound sterling as markets factor in earlier monetary policy tightening than previously predicted; on the other hand, cable should weaken if the release underwhelms the consensus. However, be aware that the UK consumer price index is a more important inflation gauge for the Bank of England and that, anyway, moves should be slight due to the release being overshadowed by the U.S. employment report.

Following that, at 6:00 a.m. EST, German industrial production for December will be released. Production is expected to rise 0.6% on the month, following its 0.7% gain previously.

Meanwhile, annualized, industrial production is slated to fall 3.7%, which would be, nonetheless, a slower rate of decline than its 8.0% drop in November.

If production is significantly higher than the consensus, a euro rally could occur. Meanwhile, downbeat data would put pressure on the single currency. Once again, it’s necessary to reiterate the caveat that the nonfarm payrolls report could overshadow the data and dampen any moves either way.

At 7:00 a.m. EST, Canada will release its employment report for January. Canada’s economy is expected to have created a net 15k jobs in the month, more than erasing the 2.6k decline in December.

The unemployment rate, meanwhile, is expected to remain at 8.5%.

Significantly above-consensus data will likely bolster the Canadian dollar, while downbeat figures should put pressure on it. However, traders should be aware that USD/CAD will undoubtedly be more affected by the nonfarm payrolls report just ninety minutes later.

At 8:30 a.m. EST, the U.S. benchmark employment report for January will be released. Nonfarm payrolls are expected to rise 15k following their 85k fall in December.

However, the unemployment rate is forecast to remain at 10.0% in January. Meanwhile, manufacturing payrolls are expected to fall by 20k, a smaller decline than their 27k shortfall in December.

Related employment data for January have been mixed. The U.S. ADP private sector employment report indicated that 22k jobs were lost in January, better than the 30k shortfall expected by economists and the revised 61k fall in December.

Also, the ISM services index’s employment component rose to a 44.6 level in January from 43.6 the month before. However, as the component remained below the 50-threshold indicating expansion it suggests employment in the U.S. service sector, its largest, continued to contract in January, albeit at a slower pace than the month before.

On the other hand, the ISM manufacturing index’s employment component rose to 53.2 in January from 50.2. The data indicated that U.S. manufacturing sector employment expanded in the month and at a faster pace than in December.

Finally, the survey week for the nonfarm payrolls report includes the 12th day of the month in question. During the week including Jan. 12, initial jobless claims (week-ending Jan. 16) rose to 482k from their revised 446k level the previous month. The increase disappointed economists’ expectations for a fall to 440k.

In terms of foreign exchange reaction to the data, traders should be aware of the vital importance of the revisions to the previous month and not just trade on the headline figures – nonfarm change and the unemployment rate. A significant revision to December’s change in nonfarm payrolls can play a vital role in how markets interpret January’s figures.

Following downbeat initial jobless claims data on Thursday, U.S. equity markets as well as riskier currencies like the euro and Australian dollar tanked; the greenback was broadly stronger, though even it, like the single currency, suffered serious losses at the hands of the yen. Therefore, with markets depressed about the U.S. labour situation, even inline figures may lead to a greenback rally. Above-consensus data are even more likely to strengthen the U.S. dollar.

However, in the context of Thursday’s extreme moves, below consensus figures are likely to have an exaggerated impact on markets. Indeed, the huge safe haven bid seen in the yen’s surge yesterday could well be replicated on Friday if the nonfarm payrolls disappoint markets. In that case, the yen would benefit at the expense of the greenback (and also the euro).

INTEREST RATES:

ADDITIONAL RESOURCES:

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• For in depth analysis per market session read The Overnight Express:
 

Have a great trading day!