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DOLLAR: Although trading has been quiet so far, the Dollar has drifted higher this morning in anticipation of today’s U.S. Employment numbers. Much of that support has come from profit-taking in front of today’s numbers, with only the Yen following through with its current trend and making a new 10-month low overnight. A strong non Farm payroll number this morning is likely to cause broad-based Dollar strength, particularly against the Yen where economic conditions remain relatively weak. On the other hand, any sort of negative surprise with either the Non-Farm number or the Unemployment rate could trigger a selloff, with the Euro, Pound and Canadian likely to be the main beneficiaries. Although prices have fallen away from last week’s highs, the Dollar has only moved back towards the high end of its trading range from early February to late March. Whether it remains there could depend on how this morning’s numbers are received by a thin, pre-holiday market.
EURO: The June Euro has remained close to the high end of its recent rally off of last week’s lows, but profit-taking has caused it to slide lower going into this morning. With the recent positive tone of Euro-Zone economic numbers, and with the E.U. sovereign debt crisis fading towards the background, prices have been able to recover from their recent lows. This could change very quickly if we have a strong non Farm Payroll number, as the June Euro could head back to this week’s lows in a hurry.
YEN: The June Yen continued to head lower overnight as it produced a new 10-month low for a fourth day in the row. With deflationary pressure limiting the possibility for growth in Japan, the Yen has been particularly weak against the Dollar. While it would take a huge change in sentiment to reverse the current trend, prices may be vulnerable to a sharp short-covering rally if today’s numbers fail to match expectations. However, look the Yen to extend itself to the downside if these numbers are anywhere close to market forecasts.
SWISS: Yesterday’s massive selloff, in which the June Swiss went from 0.9587 to 0.9435 in 10 minutes, has scared the market to such an extent that prices have now found a new trading level well below yesterday’s highs. The rally up to new all-time highs against the Euro appears to have been the final straw for the Swiss National Bank, as it is likely that they finally made good on their earlier threats of intervention. With this activity taking precedence with the June Swiss, any reaction to today’s Employment numbers is likely to be muted.
POUND: This week’s rally in the Pound seems to have run out of steam, as profit-taking in front of today’s numbers appears to have prevented a test of last month’s highs. With the upcoming U.K. elections taking more of the market’s focus away from recently positive economic numbers, trading could get choppy and two-sided over the near future. However, weak Employment numbers on this side of the Atlantic today have the opportunity to lift the Pound well above its recent trading range.
CANADIAN DOLLAR: Surprisingly enough, it has been the June Canadian which has been the weakest currency against the Dollar so far this morning, as a move to new highs seems to have derailed by overnight profit-taking in front of today’s Employment numbers. With the strong correlation of the U.S. and Canadian economies, a stronger than expected Non-Farm Payroll number has the potential to send the June Canadian up beyond last month’s highs and close to parity with the U.S. Dollar.
TODAY’S MARKET IDEAS: Given the uncertainty over today’s Employment numbers, along with the illiquidity of pre-holiday markets, traders should lean towards using option strategies ahead of futures in order to limit their risk.
Currency Market Commentary – 2010.04.02
by Dave Hightower on April 2, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
DOLLAR: Although trading has been quiet so far, the Dollar has drifted higher this morning in anticipation of today’s U.S. Employment numbers. Much of that support has come from profit-taking in front of today’s numbers, with only the Yen following through with its current trend and making a new 10-month low overnight. A strong non Farm payroll number this morning is likely to cause broad-based Dollar strength, particularly against the Yen where economic conditions remain relatively weak. On the other hand, any sort of negative surprise with either the Non-Farm number or the Unemployment rate could trigger a selloff, with the Euro, Pound and Canadian likely to be the main beneficiaries. Although prices have fallen away from last week’s highs, the Dollar has only moved back towards the high end of its trading range from early February to late March. Whether it remains there could depend on how this morning’s numbers are received by a thin, pre-holiday market.
EURO: The June Euro has remained close to the high end of its recent rally off of last week’s lows, but profit-taking has caused it to slide lower going into this morning. With the recent positive tone of Euro-Zone economic numbers, and with the E.U. sovereign debt crisis fading towards the background, prices have been able to recover from their recent lows. This could change very quickly if we have a strong non Farm Payroll number, as the June Euro could head back to this week’s lows in a hurry.
YEN: The June Yen continued to head lower overnight as it produced a new 10-month low for a fourth day in the row. With deflationary pressure limiting the possibility for growth in Japan, the Yen has been particularly weak against the Dollar. While it would take a huge change in sentiment to reverse the current trend, prices may be vulnerable to a sharp short-covering rally if today’s numbers fail to match expectations. However, look the Yen to extend itself to the downside if these numbers are anywhere close to market forecasts.
SWISS: Yesterday’s massive selloff, in which the June Swiss went from 0.9587 to 0.9435 in 10 minutes, has scared the market to such an extent that prices have now found a new trading level well below yesterday’s highs. The rally up to new all-time highs against the Euro appears to have been the final straw for the Swiss National Bank, as it is likely that they finally made good on their earlier threats of intervention. With this activity taking precedence with the June Swiss, any reaction to today’s Employment numbers is likely to be muted.
POUND: This week’s rally in the Pound seems to have run out of steam, as profit-taking in front of today’s numbers appears to have prevented a test of last month’s highs. With the upcoming U.K. elections taking more of the market’s focus away from recently positive economic numbers, trading could get choppy and two-sided over the near future. However, weak Employment numbers on this side of the Atlantic today have the opportunity to lift the Pound well above its recent trading range.
CANADIAN DOLLAR: Surprisingly enough, it has been the June Canadian which has been the weakest currency against the Dollar so far this morning, as a move to new highs seems to have derailed by overnight profit-taking in front of today’s Employment numbers. With the strong correlation of the U.S. and Canadian economies, a stronger than expected Non-Farm Payroll number has the potential to send the June Canadian up beyond last month’s highs and close to parity with the U.S. Dollar.
TODAY’S MARKET IDEAS: Given the uncertainty over today’s Employment numbers, along with the illiquidity of pre-holiday markets, traders should lean towards using option strategies ahead of futures in order to limit their risk.
Tags: Canadian Dollar, Currencies, Dollar, Financials, Swiss, Yen
About Dave Hightower