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Forex − Unemployment rate rises to 7.2% and non−farm payrolls drop by 524K but dollar holds strong

Mon, Jan 12 2009, 12:02 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets

Forex News and Events:

The dollar posted gains and continues to hold strong despite dismal data from the U.S. Unemployment rate fell by 0.4% to 7.2% in December and non-farm payrolls fell by a further 524K bringing the quarterly decline to over 1.5m – the largest decline since WWII. Risk appetite had only returned and subsides at the start of a new week – slow data flows not helping the situation.

Japan is closed this today, only exacerbating the lack of data in the region. Asian stocks decline as they follow the U.S’ lead from Friday. Taiwan was the only country in the region to buck the trend as the government announced steps to curb the global slowdown and reform their accounting regulations – financing would be provided.

The EURUSD left a downward channel it has been trading since the end of 2008. This channel – a 200pip bearish range – saw the pair break away in anticipation to a worse than expected number for the NFP’s. However, the 524K decline was uncannily close to the 525K slump economists had expected. EURUSD broke out from 1.3550 to 1.3800 on The initial predictions as traders priced in the eventual number that would end a catastrophic year. The reverse move happened when the number came out, confirming the dismal state of the U.S economy but failing to confirm the most pessimistic of pundits.

The Euro fails to shine through these tough times as German manufacturing numbers show a swift rebound is not likely. The most recent industrial production came in at -6.4% y/y verses a consensus of -5.7%. The German Bundesbank president Weber highlighted that growth risks for the German economy were more dire than expected.

Today's Key Issues (time in GMT):

15:30 CAD Business Outlook Future Sales
15:30 CAD Bank of Canada Senior Loan Officer Survey 55.0 Vs. 49.8
19:00 USD Treasury Paulson speaks on market climate

The Risk Today:

EurUsd Market traded as high as 1.3799 on Thursday but reversed most of its gain down to 1.3327 low this morning. Dollar continues to defy bad numbers and could regain 1.3290 support line from December’s Euro bullish move. Resistance at 1.3400 being tested twice today would break the 61.80% retracement level that we see on the 1.2575 – 1.4700 move we witnessed in December. Initial resistance holds 1.3720 Dec 15 high. On the downside, 1.3400 gives way to 1.2575 – the beginning of the December move.

GbpUsd Market reversed most of Cable gains from mid-December down to 1.4360 before rising again to 1.5375. On the downside, strong supports hold 1.4866 – 50% Fib retracement. Further support holds 1.4376 31st December low. Sentiment remains mixed to negative but renewed strength may open the way to 1.5659 (December 17th high) and even 1.6006 (50% retracement of 1.7650 – 1.4363 decline). Turnaround Uptrend may look for 1.6673 30th October high strong resistance.

UsdJpy UsdJpy broke out the 4-month downtrend upper trendline and hit 94.64 high on Tuesday. Initial resistance holds 94.59 (6th Jan high). On the upside, strong resistance holds 100 pivot point, but only a recovery over 103 upper trendline and 105 pivot point will put focus again on 108 and 110.67 15th August high. Strong resistance holds 97.43 24th November high. Strong support holds 90.00 – December 29th Resistance level. Renewed downtrend may open 79.70 April 1995 low.

UsdChf Market traded as high as 1.1189 on Friday as the dollar extends gains and recovers Jan 8th low of 1.0865. Uptrend may open the way through 1.1282 former support and possible trend up to 1.2298, 21st November high. Over it, 1.2463 holds strong resistance ahead of 1.2506 (61.8% retracement of 1.4278 – 0.9639 decline). Renewed weakness may break down 1.0735 and return toward 1.0500 and 1.0375. Such a move may look for 1.0013 15th July low in front of 0.9637 17th March low.

Resistance and Support:

Published on  Mon, Jan 12 2009, 12:07 GMT