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NFP and an Interest Rate Decision
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NFP and an Interest Rate DecisionFollowing a bounce at the start of the U.S session, the major stock indices lingered around their highs of the day as the bulls prevailed. Even though economic data showed a mixed scene, the major indices managed to close the session with an average gain of 0.5%.
On one hand, housing data continued to show a gloomy picture as Pending Home Sales showed a further drop of 0.1%, while construction spending dropped by a whopping -0.90%. On the other hand, ISM manufacturing Prices and the Index both climbed, showing a slight improvement. ADP nonfarm employment was also scrutinized by traders as the result showed that there were further job losses in the private sector. The ADP result is often closely watched as it is known to predict the government non-farm payrolls data.
The financial was the only sector out of the 9 major sectors traded on the AMEX that closed in negative territory. The sector dropped by 0.5%, finishing at its low of the day as diversified banks and regional banks gave in to the selling pressure. CAD continued to range around critical levelsOver the last couple of days volatility on the Forex market has dropped significantly lower. Even though the major pairs are presenting days with sharp movements, those session tend to end around prior levels. The Dollar index has been lingering around 80 points, forcing individual pairs into range.
The USD/CAD presented a sharp turnaround yesterday after climbing to a high of $1.1652. Throughout the session the Dollar gave up its strength as the Canadian Dollar sprung higher. Even though this pair closed the session just off its lows, it did present an extremely bearish candlestick. As of now the USD/CAD is trading on major support of $1.1478.
On other pairs, the EUR/JPY continued to climb after bouncing off its trend line support while the EUR/GBP climbed towards its upper trend line resistance level.
EUR/JPY Daily Chart
EUR/GBP Daily Chart
What is going to spark movement today?
Today’s session could break the recent market boredom, especially due to the vast amount of data being released. The two major events are going to be the ECB’s interest rate decision and the employment figures from the U.S. While the decision itself is going to be an important one, something that could affect the Euro crosses, most investors will scrutinize the ECB’s statement that will explain how they plan to deal with their economy’s problems. Last time round the ECB failed to present any major statement sticking to his previous comments, regarding bond purchasing. One must note that since the ECB’s last meeting certain sectors in the economy have shown mild improvement, which could yet again lean Trichet to a more subtle speech.
Over in the U.S, the unemployment rate is expected to reach a whopping 9.6%, after presenting a 9.4% result last month. Many are questioning the impact of this result, wondering if the volatility will manage to break the indices and currency pairs out of range, or whether the movements will only be a 1 minute thing, especially as the 9.6% figure is already baked into the market’s price.
As stated in numerous reports the markets are still holding around current levels, even when analysts are now predicting double digit numbers. With a 25 year high unemployment rate and continuing problems in the economy, it will be interesting to see if further job losses will have a negative impact this time round. One must note that should the result diverge dramatically from the expected it could send investors back into safe-haven assets.
To view the full economic calendar click here.
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