- US Dollar boosted by last Friday’s jobs data
- Sterling ahead on commodity currencies
I don’t know, I take one day off to sleep off a cold and the market
goes doolally. A spike in the level of new non-agricultural jobs gave
the US Dollar a real boost on Friday and we start the year, as we have
so many years in the past, with a strengthening USD. The USD did have
some other help but more of that below. However, whilst the Pound
slipped against the USD along with the Euro and many others, the
‘commodity’ currencies; the Aussie, Kiwi and Canadian Dollars as well
as the South African Rand, lost ground against the Pound and we also
start the week with very attractive levels for those planning a
migration to any of these destinations. The rest of the week looks a
little quieter until we get to Wednesday when the trade balances are
published for the US and UK and then we have a soupsant of UK and US
industrial and retail data on Thursday and Friday. And we mustn’t
forget the interest rate decisions from the European Central Bank and
the Bank of England which are both due on Thursday lunchtime. No change
is expected from either side of the Channel but there is always the
potential for a glimmer of information about the future direction of
interest rates and that will keep traders interested. Have a great week
and welcome back to those who managed to wangle an extra long break
and those who are detoxing on mineral water and organic fruit -
apparently you are wasting your money. I guess we always knew that but
had the feint hope that there might just be something in it…or not as
the case may be.
13.30GMT on the first Friday of the month is always eagerly anticipated
by traders in all financial markets. It marks the release of key
employment data in the form of the US non-farm payroll data and this is
the first piece of US statistical economic news which relates to the
preceding month. All manner of forecasts are available and there is
even a relatively new report which tries to pre-empt the non-farms. All
of this was tosh and piffle on Friday because rather than matching the
forecast 110,000 fresh jobs, the employment number was actually 165,000
and that was such a shock for those who have spent the last three
months writing the US Dollar off, that GBPUSD dropped a full cent in a
matter of minutes. The Euro fared no better and other currencies were
also shed as traders covered some of their open speculative trades amid
the sudden realisation that America Inc wasn’t as dead as they had
thought. This news came on the back of improved reports from the US
Institute of Supply Managers and ahead of this weeks retail sales data
which is also forecast to be rather more encouraging. So, we have to
watch some very significant levels on GBPUSD with $1.9200 proving a
significant support level for a number of reasons, so a break below
here could take us down to $1.88 in a rapid fall, only pausing for
breath at the psychologically significant $1.9000. $1.9460 is likely
to restrict any upward movement should US data disappoint. A break
therefore above $1.9500 would suggest that we are heading higher again.
Until either of these levels is breached, the range is set within them.
Sterling
spiked against the New Zealand Dollar on Friday after testing near the
expected bottom of the range in the previous day’s trade. The problem
with this pair is that if you look for reasons within New Zealand
and/or Britain for this move; you will be frustrated because the real
reason was external to both. The fact that rumours were rife that the
Bank of Japan will be raising its base interest rate sooner rather than
later was the culprit because it will lessen the flow of funds out of
Japan in search of higher interest rate yields (the so called carry
trades) and that will reduce the demand for the New Zealand Dollar in
spite of the 7.25 percent return that it offers. The other factor in
this move was a general slide in the commodities market and this
triggered a bout of profit taking amongst forex traders. The key level
in GBPNZD is NZ$2.8400 and any close above here would indicate the
trend has changed and an upward move of greater substance is on its
way. This is not what we expect at the moment; rather a failure to
break higher keeps the GBPNZD exchange rate in the current downward
trend - a trend which has been in place for 9 months - and a visit to
NZ$2.72 is envisaged in the coming months.
The only man who is really free is the one who can turn down an invitation to dinner without giving an excuse.
Jules Renard
FX Research and Analysis undertaken by:
David Johnson - Halo Financial
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