US Non-Farm Payrolls Set to Generate Heavy Market Volatility

Investor optimism that Greece would successfully execute an important debt-swap, boosted riskier assets throughout yesterday’s trading session. As a result, the EUR/USD shot up over 100 pips during the European session, reaching as high as 1.3272. Today, the US Non-Farm Payrolls figure is forecasted to generate significant market volatility. Assuming the indicator comes in as expected, risk taking may increase, which could help the euro extend yesterday’s gains.

Forex Market Trends

Daily Trend down down down up down down
Weekly Trend up down down down down up
Resistance 1.3360 1.5949 81.89 0.9187 1.0795 0.8485
1.3313 1.5882 81.33 0.9136 1.0727 0.8444
1.3275 1.5840 81.05 0.9103 1.0685 0.8419
Support 1.3237 1.5773 80.58 0.9051 1.0618 0.8378
1.3190 1.5731 80.30 0.9019 1.0576 0.8353
1.3114 1.5664 79.83 0.8967 1.0508 0.8312

Economic News

USD – US Employment Data May Lead to Dollar Gains

The US dollar took some losses against its riskier currency rivals yesterday, after positive euro-zone developments caused investors to move away from safe-haven assets. Against the euro, the USD tumbled well over 100 pips, while the AUD/USD jumped as high as 1.0667 during the European session. At the same time, the USD/JPY shot up as high as 81.71 after negative Japanese indicators resulted in increased pressure on the yen. Analysts are warning that it will be hard for the USD/JPY to break above the 82.00 level as long as US interest rates remain at their current level.

Turning to today, the US Non-Farm Employment Change figure is guaranteed to be the highlight of the trading session. At the moment, analysts are forecasting that the US added around 208K jobs in February. If true, the number would represent a healthy boost in the US employment sector, and could result in increased risk taking in the marketplace. At the same time, the Non-Farms figure is notoriously hard to predict. If the figure comes in significantly below expectations, safe haven currencies like the yen could see gains to close out the week.

EUR – EUR Sees Gains amid Positive News

The euro climbed against virtually all of its main currency rivals yesterday, as optimism that Greece would successfully complete a debt swap resulted in an increase in risk taking among traders. A press conference from the ECB President did little to influence the euro, after euro-zone interest rates were left at their current level of 1%. The EUR/USD climbed as high as 1.3272, while the EUR/JPY gained approximately 135 pips, peaking at 108.33. Despite the gains, analysts were quick to warn that ongoing worries regarding the euro-zone debt crisis limited any gains by the common currency.

Today, employment data out of the US is likely to result in heavy fluctuations among euro pairs. Should the Non-Farm Payrolls figure come in at or above the expected 208K, the euro may be able to extend yesterday’s gains against safe-haven currencies, specifically the Japanese yen. At the same time, investors could revert back to safe-haven assets in the case that the employment data comes in significantly below forecasts. The euro would likely drop against most of its main currency rivals as a result.

JPY – Yen Remains Bearish Following Poor Japanese Fundamentals

The yen extended losses against most of its main currency rivals yesterday, as poor Japanese fundamental indicators created doubts about the currency’s safe haven status. The USD/JPY turned bullish after the Japanese Current Account and Final GDP Price Index came in below expectations. The pair peaked yesterday at 81.72 before reversing during the evening session. Against the euro, the yen dropped close to 170 pips following an increase in risk taking amid positive euro-zone news. The EUR/JPY went as high as 108.34 before staging a reversal.

Turning to today, the yen is likely to be heavily influenced by the US Non-Farm Payrolls figure, set to be released at 13:30 GMT. Should the figure come in below expectations, investors may begin to doubt the pace of the US economic recovery and revert back to safe-haven assets. In such a scenario, the yen would likely see gains against most of its main currency rivals.

Crude Oil – Risk Taking Leads to Gains for Oil

Optimism regarding a Greek debt swap deal led to an increase in investor risk taking yesterday. The price of oil saw a brief spike as a result, following days of downward movement. Crude moved up over $1 a barrel yesterday, peaking at $107.08 during the European session. The commodity was not able to sustain its upward momentum, and eventually turned bearish during evening trading.

As we close out the week, the price of oil could see further gains depending on the result of the US Non-Farm Payrolls figure. A better than expected figure could result in additional risk taking among investors, which could turn oil bullish once again. At the same time, should the figure come in below the forecasted 208K, investors could once again revert to safe-haven assets which may result in oil moving downward.

Technical News

The Williams Percent Range on the daily chart has drifted into oversold territory, indicating that upward movement could occur in the near future. The Slow Stochastic on the same chart appears to be close to forming a bullish cross. Traders will want to keep an eye on this indicator. If the cross forms, it could be a sign of an impending upward correction.
Most long-term technical indicators place this pair in neutral territory, meaning that no definitive trend is apparent at the moment. Traders may want to take a wait and see approach, as a clearer picture may present itself later on.
Following the bearish trend the pair has seen in recent days, technical indicators are now showing this pair in neutral territory. The Williams Percent Range on the daily chart is at -50, while the Relative Strength Index is right around the 60 level. Taking a wait and see approach may be the wise choice.
The daily chart’s Williams Percent Range is currently in overbought territory, indicating that a downward correction may occur in the near future. A bearish cross on the 8-hour chart’s Slow Stochastic supports this theory. Going short may be a wise choice for this pair.

The Wild Card

A bullish cross on the daily chart’s Slow Stochastic indicates that this pair could see upward movement in the near future. This theory is supported by the 8-hour chart’s Relative Strength Index which has dropped into oversold territory. Forex traders may want to go long in their positions ahead of a possible upward breach.

Written by