US Non-Farm Payrolls Set to Create Major Market Volatility

The USD/JPY was able to extend its bullish run throughout the day yesterday, following a batch of positive US economic news which boosted faith in the American economic recovery. The better than expected news also resulted in moderate gains for the euro, as investors decided to shift their funds to higher yielding assets. Today, US news is once again forecasted to generate major volatility in the marketplace. Specifically, the all-important US Non-Farm Payrolls figure, set to be released at 12:30 GMT, could boost the dollar further if it comes in above its forecasted level.

Forex Market Trends

Daily Trend down down up up down down
Weekly Trend down down up down up down
Resistance 1.3011 1.6191 81.02 0.9444 1.0476 0.8117
1.2968 1.6146 80.62 0.9400 1.0435 0.8072
1.2935 1.6118 80.38 0.9373 1.0410 0.8044
Support 1.2889 1.6072 79.99 0.9327 1.0369 0.7998
1.2860 1.6044 79.74 0.9300 1.0344 0.7970
1.2814 1.5999 79.35 0.9256 1.0303 0.7925

Economic News

USD – Positive US News Boosts USD/JPY

A batch of better than expected US news yesterday, specifically the ADP Non-Farm Employment Change and ISM Manufacturing PMI, resulted in the US dollar extending its gains against the Japanese yen. The USD/JPY spent most of the day trading at around the 80.10 level, just below a recent four-month high. The greenback did not have as much luck against some of its higher-yielding currency rivals. The positive news resulted in investors shifting their funds to riskier assets, causing the dollar to fall against the Swiss franc. The USD/CHF fell close to 40 pips during mid-day trading, eventually 0.9298.

Today, US dollar traders will want to pay close attention to the US Non-Farm Payrolls and Unemployment Rate, both scheduled to be released at 12:30 GMT. The employment data is widely considered the most important indicator on the forex calendar and consistently leads to volatility in the marketplace. Today’s news is expected to show that 123K new US jobs were added in October, slightly better than the 114K added in September. Should today’s news come in above 123K, the dollar could see additional gains against the yen.

EUR – Risk Taking Boosts Euro

Better than expected US economic indicators yesterday led to risk taking among investors, which helped boost higher yielding currencies, like the euro, throughout the day. Against the US dollar, the euro was able to advance more than 40 pips during mid-day trading, eventually trading as high as 1.2980 at the beginning of the US session. The EUR/JPY moved up over 50 pips throughout the European session to trade as high as 104.00. A minor downward correction brought the pair to 103.89 during afternoon trading.

Today, the euro is virtually guaranteed to see volatility following the release of the US Non-Farm Payrolls figure. Following yesterday’s better than expected ADP Non-Farm Employment Change figure, many investors are feeling confident that today’s news will show additional growth in the US labor sector. If true, riskier assets like the euro could see additional gains before markets close for the weekend. That being said, traders will want to remember that Non-Farms figure is notoriously difficult to predict. Should today’s news disappoint, the euro could turn bearish.

Gold – Global Economic Fears Cause Gold to Slide

The price of gold fell more than $10 an ounce during mid-day trading yesterday, as fears regarding the pace of global economic growth caused the precious metal to reverse some of its recent gains. Prices fell as low as $1716.48 by the afternoon session. That being said, losses were limited due to better than expected US economic data and the overall trend remained bullish.

Turning to today, gold traders will want to pay attention to highly important US employment data set to be released at 12:30 GMT. Any better than expected news could help relieve fears about the pace of the global economic recovery, which may help boost higher yielding assets, like gold, before markets close for the weekend.

Crude Oil – Drop in US Inventories Boosts Price of Oil

A significantly lower than expected US Crude Oil Inventories report yesterday resulted in the price of oil spiking by more than $1 a barrel during afternoon trading. The US data, which came in at -2.0M, signaled to investors that demand has gone up in the world’s leading oil consuming country. As a result, oil was able to trade as high as $87.30.

Today, oil trades will want to continue monitoring news out of the US, particularly the Non-Farm Payrolls figure. Any better than expected news may signal to investors that demand for oil will continue to increase, which may help crude extend yesterday’s bullish trend.

Technical News

A bearish cross on the daily chart’s MACD/OsMA is indicating that this pair could see a downward correction in the near future. This theory is supported by the weekly chart’s Williams Percent Range, which has crossed into overbought territory. Traders may want to open short positions for this pair.
In a sign that this pair could see a downward correction, the Relative Strength Index on the weekly chart is approaching the overbought zone. Furthermore, the MACD/OsMA on the same chart appears close to forming a bearish cross. Traders will want to keep an eye on these two indicators, as they may soon point to impending bearish movement.
While the Williams Percent Range on the weekly chart has crossed over into overbought territory, most other long term technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach for the time being, as a clearer picture is likely to present itself in the near future.
A bullish cross on the weekly chart’s Slow Stochastic indicates that this pair could see an upward correction in the coming days. Additionally, the Williams Percent Range on the same chart is currently in oversold territory. Traders may want to open long positions for this pair.

The Wild Card

The Bollinger Bands on the daily chart are narrowing, indicating that a price shift could occur in the near future. Furthermore, the MACD/OsMA on the same chart has formed a bullish cross, indicating that this price shift could be upward. This may be a good time for forex traders to open long positions ahead of a possible upward correction.

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