MasterForex: The impact of non-farm payroll is hard to predict, and non-US currencies may break down and fall - masterforex

by master0722 on 2011-08-05 13:10:06

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Yesterday, the Japanese government intervened in the foreign exchange market, causing the dollar index to rise. However, during the evening session, concerns about a new global economic recession triggered a stock market crash, leading to another appreciation of the yen. Last night, the number of initial jobless claims in the U.S. last week was reported at 400,000, slightly lower than the market's expectation of 403,000 people, which caused all three major U.S. indices to fall by more than 4%. Today, during the Asian session, stock markets across the region also experienced a sharp decline, preliminarily reflecting market panic.

In Europe, before employment, it was expected that both the European Central Bank and the Bank of England would keep their benchmark interest rates unchanged. Meanwhile, the bond yields of Italy and Spain significantly increased, indicating that the market perceives the growing debt risks in Italy and Spain, exacerbating market panic. Currently, these bond yields have reached their highest level in 14 years, seemingly retracing Greece's old path. This has prompted EU President Barroso to call on member states to expedite the approval of crisis measures agreed upon at the July 21 summit, to curb the damage caused by Greece, Ireland, and Portugal to other economies.

Today, the most critical economic data will be the U.S. non-farm payroll numbers tonight. It is difficult to predict the impact of the data because poor non-farm figures could further stimulate risk aversion sentiments, pressuring non-U.S. dollar currencies. Therefore, cautious investors should preferably wait for the data to be released before entering the market.

Euro/USD:

Early yesterday, direct intervention by the Bank of Japan in the foreign exchange market caused the dollar to rise, impacting the Euro/USD pair and causing a pullback. Before the New York opening, the European Central Bank announced maintaining its benchmark interest rate at 1.5%, with Trichet expressing concerns about economic growth, hinting that there would be no interest rate hike in the future, putting pressure on the euro. At the same time, concerns about the deterioration of Italian and Spanish debts resurfaced, causing the euro to face significant market pressure overall. Under this influence, European stocks plummeted sharply, followed by a similar crash in U.S. stocks, leading to a significant drop in the euro.

Objectively speaking, the Euro/USD once again broke below the 1.42 bull-bear dividing line, tilting the market towards bears. In the coming days, the trend is likely to favor shorting the Euro/USD. Investors can consider selling high near 1.42 and 1.4150.

USD/JPY:

The Bank of Japan conducted direct market intervention during the Asian session, with reports suggesting that the Bank of Japan purchased approximately $7-8 billion through banks or brokers while heavily selling yen to moderate the recent rapid appreciation of the yen. However, the overall risk-averse sentiment last night caused the yen to appreciate again. It is believed that the Japanese government will intervene in the foreign exchange market again in the future. Therefore, investors can patiently wait for the Japanese government's next intervention after the USD/JPY falls, becoming quick responders to the market.

GBP/USD:

The movement of the pound was quite interesting. Early in the day, it quickly rose due to the Bank of Japan's intervention but then rapidly fell back. From the GBP/JPY chart, it appears that the pound's movement is relatively weaker. Primarily, this is because after the UK announced no interest rate hike yesterday, it also declared maintaining the original scale of quantitative easing, disappointing the market.

From a technical perspective, the pound saw a rise and fall yesterday, with the current exchange rate temporarily supported around the 20-day moving average at 1.6225. The short-term trend is downward. Looking at the overall market situation currently, the probability of breaking down is higher. Therefore, we suggest investors pay attention to whether the resistance around 1.4629 can suppress the exchange rate. If the pound encounters resistance again, one could consider shorting the pound.

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