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Asian Session − Bracing for a Potential NFP Whopper

Fri, Jan 9 2009, 10:02 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets

Market Brief

The Usd was range-bound in the Asian session, as uncertainty surrounding todayʼs NFP reports clouds market direction. The EurUsd traded between 1.3740 to 1.3640, while the UsdJpy traded between 91.58 to 91.04. Currently, Asian equity indexes are painting a mixed picture, while European markets are not fairing much better. Judging from the current trading patterns, participants will be waiting for economic data both in Europe and the US before entering the market en force. Commodity prices have stabilized, with risk appetite and volatility slacking slightly. On the political front, President-elect Obama gave a speech on the US economy but failed to provide solid details. However, he did stress the fact that the price tag for this stimulus package would be hefty.

Yesterday, as expected, the BoE's MPC lowered its policy rate by 50bp to 1.5%. This rate is now the lowest on record, which is impressive considering that the institution has been active since 1694 and highlights the severity of the current economic crisis. MPC member attempted to balance, saving the UK economy with staying away from a cut that would pressure the Sterling. We expect further cuts ahead, very close to zero, as the domestic economic conditions deteriorates (illustrated by today's manufacturing output release) and inflation continues to be a non-issue.

In European session, markets will be watching German industrial production, which is expected to show that conditions are quickly spiraling downwards, which follows on the heals of yesterday's EC survey showing recession in the Euro zone is deepening. For those participant that are betting on the Eurozones growth prospects and the Euro, these new numbers should be a eye opener that conditions will get worse before they get better.

Today's US session highlight is obviously the US NFP report. Following the ADP numbers earlier in the week, the markets are clearly pricing in a negative number. The real question is where is consensus? Estimates run the range from -500k and up (estimates up to -800k) but we are benchmarking the release at -520k. We expect the build up to the release will be Usd negative, as traders clear out of the way of a potential massive decline. And from there, the greenbacks near term fate depends solely on the size of the decline.

Currency Tech

AUDUSD
R 3: 0.7353
R 2: 0.7269
R 1: 0.7142
CURRENT: 0.7034
S 1: 0.6957
S 2: 0.6919
S 3: 0.6853

EURJPY
R 3: 128.56
R 2: 127.67
R 1: 126.52
CURRENT: 124.46
S 1: 124.11
S 2: 123.71
S 3: 122.57

USDSGD
R 3: 1.4905
R 2: 1.4896
R 1: 1.4845
CURRENT: 1.4789
S 1: 1.4706
S 2: 1.4675
S 3: 1.4502

• S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot

Published on  Fri, Jan 9 2009, 11:37 GMT