Wall Street finished lower Thursday as investors braced for Friday’s monthly employment report. People are worried about today’s number, because it really is a gamble now. The weather impacted in months prior, and then in April we got this little pop, and then ADP threw a wrench into expectations. After flirting with another triple-digit drop, the Dow Jones Industrial Average on Thursday ended at 12,248.55, down 41.59 points. The Standard & Poor’s 500 Index fell 1.61 points to 1,312.94 while the Nasdaq Composite Index rose 4.12 points to 2,773.31.
Crude had a build of 2.9million barrels, Gasoline had a build of 2.6 million barrels, and distillates were up 1 million. Stocks were mixed awaiting tomorrows unemployment data, but the possibility of a big breakdown is viable. The surprise of the day was Natural Gas where injections were shy of expectations by 10bcf, but the trade is testing the higher end of the range with the huge spike in volume. A typical rule of thumb when volume spikes is a trend reversal, which plays into the range natural gas has been bouncing around the last 6 months.
Today: Non-Farm Payrolls (IMPORTANT)
As per the ADP report, unemployment claims were higher than expected at 422k, which wasn’t far off from expectations of 413k but it still considered bad news. US data releases this week have done little to support the greenback as highlighted by yesterday’s weak ADP job numbers and the recent trend of weak US economic data feeding into USD buying is beginning show cracks. Economists have begun lowering their forecasts’ for Friday’s NFP jobs report. Storm clouds are beginning to form over the head of the US economy given the Fed’s QEII program is due to end next month and little has been proposed on the policy front to address the recent US slowdown. The payrolls report today may intensify the negative sentiment.
Fundamentals aside, we expect today’s employment data to be in line with expectations but we’ll play the charts. The breakdown in metals today indicates that we may have a positive inverse effect on the US dollar. With the economy cooling down, we would have to expect commodity prices to come under pressure going into the end of the month. This was evident in crude oil early Thursday, but the impressive rebound should be considered a bull trap at the moment. Traders are encouraged to look for a sharp spike in crude prices as a good selling opportunity.
With respect to the Euro, Trichet proposed setting up a finance ministry for the 17-nation region to help better manage the currency, this was taken as a positive step forward ahead of Greece’s debt restructuring and supported the Euro throughout the day. On the American side, Moody’s warned that if the US government cannot make progress in raising its debt limit by Mid-July it could also suffer a ratings cut. This decision may go down to the wire, but nobody wants to see social security payments not go out, and with elections coming up, it’s just a matter of time. It should be an exciting day today.
Today’s Important Economic Announcements (GMT)
8:30 AM GBP Services PMI
12:30 PM USD Non-Farm Employment Change & Unemployment Rate
2:00 PM USD ISM Non-Manufacturing PMI
EUR/USD
The euro recovered its losses and then some versus the dollar after yesterday’s rating downgrade of Greece by Moody’s. Helping to bring the euro off of its lows today were comments made by ECB President Trichet who spoke of further fiscal intervention in the euro zone and a decent Spanish bond auction. Liquidity was noticeably tighter with public holidays in France and Germany which may have helped ease the euro off of its lows. The jump in the EUR/USD this morning moved the pair above the 50% retracement level from the May decline at 1.4450. The next test will come at 1.4570 from the 61.8% retracement. To the downside the 1.4350 level may prove to be supportive. The payroll report today may is likely to push the EUR/USD lower.
Stop Loss: 1.4521
Take Profit: 1.4418
USD/JPY
It may seem that Japan has dodged a bullet with Prime Minister Naoto Kan as the country can push forward with its policies to stabilize growth and finances. In reality, Kan’s plan to remain in power until after the bulk of the earthquake recovery is complete leaves the government in a ‘lame duck’ situation where badly-needed reform to the fiscal situation and economic support will be even more difficult to pass. Our technical analysis shows that USD/JPY is now in downtrend from 82.22. Further fall is expected in the coming days, and next target would be at 80.00 area. Resistance is at 81.76. Our forecast calls for further movement towards 80.35 in the next 24 hours.
Stop Loss: 80.98
Take Profit: 80.35
GBP/USD
For event risk the sterling found the construction PMI figure to react to (the May figure was a stronger-than-expected 54.0 reading) and tomorrow’s session brings the service-sector reading; but these are not primary drivers for the currency. The fact that the 12-month rate forecast for the BoE is at its lowest level since the beginning of December (30 bps) leverages the yield potential for their still ‘richly-priced’ currency. GBP/USD may be forming a cycle bottom at 1.6304 on 4-hour chart. Key resistance is at 1.6393, a break above this level will confirm the cycle bottom, then another rise towards 1.6745 previous high could be seen. Support is at our target price of 1.6301.
Stop Loss: 1.6393
Take Profit: 1.6301
Published by www.SolidityBrokers.com
