Strong Jobs Report Fuels Dollar Gains

The greenback rallied yesterday on a report that hiring picked up in the month of December. Following better than expected inventory numbers the price of crude oil came off a 3-week low to trade above the $90 level.

Forex Market Trends

Daily Trend down up down up up down
Weekly Trend down down up up down down
Resistance 1.3233 1.5592 83.93 0.9749 1.0061 0.8554
1.3211 1.5570 83.75 0.9728 1.0040 0.8531
1.3180 1.5549 83.46 0.9695 1.0011 0.8500
Support 1.3120 1.5490 82.84 0.9635 0.9951 0.8440
1.3092 1.5461 82.51 0.9604 0.9920 0.8411
1.3070 1.5440 82.30 0.9585 0.9899 0.8390

Economic News

USD – Dollar Up on Surprising Job Data

The US dollar moved higher across the board after the release of better than expected ADP Non-Farm Jobs report. The unexpected increase in private jobs offers a ray of glimmer of hope for USD bulls and those who are bullish on the US economic recovery. The job market has been a laggard in the slow US economic recovery but may be the key to both an increase in growth as well as dollar strength.

The ADP report came in at 297k new jobs which was significantly higher than economists’ expectations of an increase of 101k.

At the close of New York trading, the EUR/USD was down sharply at 1.3145 after opening the day at 1.3270. Strong gains were booked for the dollar versus the yen with the USD/JPY trading up at 83.25 from 81.93. The USD/CHF was also higher at 0.9666 after opening at 0.9492.

Traders will now look to confirm the trend of improving employment with two key reports due out today and Friday. Today the US will release its weekly unemployment claims which are expected to come in at 400k. Friday will bring the all-important non -farm jobs report which is forecasted to show an increase of 136k jobs. Should these two key reports come in above market expectations, the EUR/USD may continue to build on the last two days of downward movement and test its 200-day moving average at 1.3060.

EUR – Euro Mixed After Strong US Data

Yesterday the EUR/USD fell to a 1-week low on better than expected US economic data but rallied against the Swiss franc and Japanese yen. This comes following better performing European industrial orders for the month of December. Last month new industrial orders rose by 1.4% on expectations of a rise of only 1.3%.

The significantly better than expected US jobs report and the stronger US non-manufacturing ISM PMI helped to boost the USD versus the euro. Portugal’s debt raising weighed on the market as the struggling European nation was forced to issue its debt at much higher yields than expected.

At the end of the trading day, the EUR/CHF was up at 1.2720 from an opening day price of 1.2595. The EUR/JPY was also higher at 109.60 from 108.74. However, the euro struggled versus the pound as the EUR/GBP was down at 0.8481 from 0.8523.

Traders will be looking towards the release of German factory orders to gauge the recovery in the industrial sector for Germany, Europe’s largest economy. Economists expect new factory orders to rise 1.0% in comparison with a previous gain of 1.6%. Should the report come in above market expectations, traders will be inclined to bid the euro higher with the next resistance level for the EUR/CHF coming in at the September low of 1.2765.

JPY – USD/JPY Shoots Higher on Strong US Economic Reports

The USD/JPY was up sharply on the day following the release of better than expected private job numbers and non-manufacturing PMI. For the past two out of three days, the USD/JPY has climbed, coming off of a two month low to now trade at a two week high. Traders have become bullish on the greenback with the stream of positive economic data coming from the States.

Yesterday the USD/JPY finished the day at 83.25 from 81.93. This is the pair’s highest close since mid-December when the pair began a continuation of the sharp downtrend.

No economic data is due out from Japan until next week so the yen will be susceptible to events and data coming from the US and Europe. Traders should be eyeing both Thursday and Friday’s US employment data as high impact events.

Should the bullish correction continue, the next resistance level for the USD/JPY rests at the mid-December high of 84.50.

Crude Oil – Crude Oil Surges on Inventory Report

The price of crude oil settled above $90 yesterday following better than expected private sector job numbers and a larger than expected drawdown in crude oil stocks.

Spot crude oil prices ended the day up at $90.28 after opening the day at $89.15.

Following the release of strong employment data, spot crude oil prices were bid higher. Later in the day momentum behind the bullish move increased with the release of the weekly crude oil inventory numbers from the US Department of Energy Administration. The weekly data handily beat market expectations with crude oil stocks declining by 4.2m barrels on expectations of a decline of 1.4m barrels.

The rally in crude could continue should the upcoming US employment releases come in on the positive side. Resistance is found at Monday’s high of $92.56.

Technical News

Two consecutive days of declines has the pair testing the 200-day moving average. The all-important support level comes in today at 1.3055. A breach below this level could trigger further declines in the pair with the next support level located at the November low of 1.2970.
The pair has been range trading for the past three weeks and is characterized by low volatility and an ADX (14) that comes in at 15, indicating a trendless trading environment. Bias is to the downside, but traders may want to wait for a defined signal before making a move.
Two days of strong gains have been booked for the pair. The price has made a solid close above its short term downward sloping trend line. More gains may be expected with resistance coming in at the mid-December high of 84.50.
The pair is up sharply since the start of the week and is now approaching a key resistance zone. Between the prices of 0.9740 and 0.9775 lie the 50 day and 100 day moving average as well as a previous rising trend line from the October and November lows which may turn into a resistance level. A breach above this zone could spur further buying of the pair to the resistance at 0.9840.

The Wild Card

Silver prices have declined for the past three trading days from a high of 31.21. The declines took the commodity below the long term trend line which began in late August. However, the price did not close below this key support level which came in at $29.25. Forex traders may find a buying opportunity here to go long with a target at the previous high.

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