Stocks Feeling Downside Pressure Ahead of U.S. Employment Data
Todayâ€™s U.S. Non-Farm Payrolls Report appears to be taking a
backseat to the fear that sovereign debt woes in the Euro Region will escalate.
Traders continue to monitor the financial difficulties in Greece while keeping one eye on the key U.S. jobs
report. This morningâ€™s report is expected to show that 25,000 jobs were added
last month. This is down from a guess of 40,000 earlier in the week.
Key retracement levels were violated in the March E-mini
S&P 500 yesterday. Look for continued weakness with 1069.50 the nearest
resistance. The charts indicate there is room to the downside with 1021.00 a
potential near-term target. Todayâ€™s jobs data will have to blow away estimates
or a solution to the fiscal problems in Greece will have to be reached in
order to trigger a rally.
March Treasury Bonds continued higher overnight. Key support
at 118â€™24 is holding which could trigger a rally to 119â€™24. A higher than
expected jobs report will trigger a break in this market provided traders
decide to focus on the economic outlook rather than risk.
The stronger Dollar pressured April Gold overnight. Last
night this market tested a key 50% level at $1052.30. Oversold conditions and
position squaring ahead of todayâ€™s jobs data stopped the decline at $1049.60.
The direction of this market will be dictated by the movement in gold.
The Dollar and demand for higher risk assets will also
influence the direction of March Crude Oil today. The supply and demand situation
remains bleak so this market has become sensitive to currency movement. Look
for an acceleration to the downside should the pair of main bottoms at 72.53
and 72.43 fail to hold as support.
The U.S. Dollar is trading higher against a basket of currencies
including the Japanese Yen which posted a strong gain versus the Greenback on
Thursday. The Forex markets are once again caving into risk aversion as traders
take positions in the safety of the U.S. Dollar.
Additional support is being provided by traders who are
buying the Dollar because of an upbeat U.S. economic outlook. These
traders believe the Dollar will rally if the U.S. Non-Farm Payrolls Report
shows an increase in jobs. Overall, however, traders are approaching the jobs
data report with caution because of yesterdayâ€™s reported surprise rise in
weekly initial claims.
Investors are looking for the U.S. Non-Farm Payrolls Report
to show zero change to 25,000 higher. This will be much better than last
monthâ€™s report which showed a surprise loss of 84,000 jobs. Earlier in the
week, economists were forecasting an increase of 40,000 jobs, but a lower ADP
Employment Report figure earlier in the week and yesterdayâ€™s surprise rise in
Weekly Jobless Claims forced analysts to lower pre-report estimates.
Following the release of the U.S. jobs report, the employment
news is likely to take a backseat as traders will refocus on the economic woes
coming out of the Euro Zone. With no change in the situation imminent, the
theme of the day is likely to remain risk aversion. Continue to look for
investors to sell high risk commodities and stocks while seeking protection in
the lower yielding Dollar and Japanese Yen.
The March Euro continued to feel downside pressure
overnight. Traders still believe that Greece lacks the means to deal with
its deficit issues on its own and are waiting for either the European Union,
European Central Bank or the International Monetary Fund to come to the rescue.
Fears are also being raised that the fiscal problems in Greece are not isolated and may
spread throughout the Euro Region should it default on its debt.
Downside pressure continued on the March British Pound
overnight. Yesterday, the Bank of England as expected announced that interest
rates would remain at a historically low level. In addition, it voted to take a
pause in its quantitative easing program, but left open the possibility it
would increase its asset buyback program should conditions warrant such a move.
Investors are now becoming concerned that the deficit problems in the U.K. may escalate like they are in Greece.Oversold short-term conditions may trigger a
On Thursday, the March Japanese Yen finished sharply higher
as investors sought safety in lower yielding assets over concerns about the possibility
of sovereign debt default in Greece.
Short-term oversold conditions are helping the Dollar to rebound slightly this
morning. Traders expect the Japanese Yen to rally further should the situation
in the Euro Region continue to escalate. At this time, the Japanese government
does not have any plans to weaken its currency.
Weaker gold, crude oil and equities are contributing to the
weakness in the March Canadian Dollar. Traders are pressuring these higher
yielding assets as they seek shelter in the lower risk U.S. Dollar. Strong
downside momentum drove the March Canadian Dollar through the last main bottom
at .9326. The weekly chart indicates that .9212 is the next downside target.
The March Swiss Franc is trading lower overnight, but losses
have been limited by an intervention by the Swiss National Bank. The SNB acted
aggressively in response to the Swiss Francâ€™s rapid appreciation against the
weakening Euro. According to SNB President Hildebrand, the central bank will
continue to â€śresolutely preventâ€ť any â€śexcessive appreciationâ€ť by he Swiss Franc
to fight deflation. Hildebrand was speaking to the Wall Street Journal at the
time of his comment.The weekly chart
indicates that .9152 is the next possible downside target.
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Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes Mon 25 Dec
00:00 Christmas Holidays
Potential Trading Opportunities
POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
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