Dollar Mixed on Light Trading Ahead of U.S. Non-Farm Payrolls
The U.S. Dollar is trading mixed overnight ahead of this
morningâ€™s Non-Farm Payrolls Report. Demand for risky assets is up overnight
putting pressure on lower yielding currencies. Traders are looking for a loss
of about 50,000 jobs. This guess is higher than last monthâ€™s actual loss of
20,000 jobs. The unemployment rate is expected to rise from 9.7% to 9.8%. A
greater than expected jobs loss is likely to drive traders into the Dollar as
this would indicate that the economy is weakening. Traders would most likely
react by dumping higher risk assets in favor of lower yielding currencies.
The EUR USD is trading flat after the European Central Bank
left interest rates unchanged on Thursday. There are still some concerns about Greeceâ€™s ability to shore up its budget deficit,
but recently announced budget cuts and tax hikes have helped to increase the
chance that aid will be coming soon from Germany
In addition, if a resolution canâ€™t be reached then look for Greece to turn toward the
International Monetary Fund for help.
In addition to keeping interest rates low, the ECB will
continue to reduce stimulus measures. ECB President Trichet downplayed the move
by saying that it â€śshouldnâ€™t be interpreted as a change in our monetary
policyâ€ť.The central bank also lowered
its inflation forecast prompting Trichet to say that he sees an â€śunevenâ€ť
Bearish Euro traders expect the sovereign debt situation in
the Euro Region to continue to pressure the currency. With many Euro nations
likely to make budget cuts, government spending is expected to be reduced while
interest rates remain low. This should keep the pressure on the Euro because
other major players such as Canada
and the U.S.
are likely to begin raising rates.
The GBP USD is trading slightly better. This market has
stabilized after a sharp break earlier in the week. Oversold conditions have
been the driving force behind the recent strength. The fundamentals remain
bearish with the U.K.
facing a huge budget deficit, a weak economy and political uncertainty. A
British Pound rally will likely stall near 1.5297 over the near-term.
The USD JPY is trading better after yesterdayâ€™s closing
price reversal bottom was confirmed by firmer overnight action. Regaining a key
50% level at 89.30 will be the key to sustaining the developing rally. Upside
momentum could take this market to 90.14 over the near-term.
Traders are selling the Japanese Yen on speculation that the
Bank of Japan will increase credit easing measures. The government wants to see
more credit pumped into the economy to ease the threat of deflation. The weaker
Yen is should make it more attractive as a funding currency.
The USD CAD is trading slightly better after almost reversing
to the upside on Thursday. Oversold conditions and the possibility of a verbal
intervention by the Bank of Canada are helping to pressure the Canadian Dollar.
The charts indicate there is room to the upside with 1.0471 the next likely
The USD CHF could break today if the Euro strengthens.
Weakness developed earlier this week after a rally in the Euro diminished the
chances of another intervention by the Swiss National Bank. The charts indicate
the trend has turned lower, setting up a possible 50% correction to 1.0513 over
the near-term. If todayâ€™s U.S.
employment reports is worse than expected, then look for pressure on the Euro
to spillover to the Swiss Franc.
Increased demand for higher risk assets is giving the AUD
USD a boost overnight. Currently this market is testing a .618 level at .9042.
Regaining this level will be a sign of strength and could lead to an
acceleration to the upside over .9070.A
failure to regain .9042 combined with a worse than expected U.S. employment
report should send this market back down to at least .8953.
The NZD USD is up overnight, but the trend remains down.
Traders are already speculating that the Reserve Bank of New Zealand is
likely to keep interest rates lower for some time as its re-evaluates the
weakening economy. Recently released weak retail and property report suggest
that the economy is not showing a sustained recovery which RBNZ requires before
considering a rate hike.
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