As London enters the market today we have the EUR/USD hovering below the 1.2700 level after making a strong surge in the late Asian session. After staying comfortably below the 1.2600 level the began it's run up almost out of nowhere.
I believe the move is mostly due to incredibly thin market conditions which was fueled by a number of prime stops sitting above 1.2650, 1.2700, and 1.2720. I would expect there to be a string of stops sitting all the way up to the 1.2820 level and with today's NFP, anything should be expected.
On Thursday the Dow closed down for the 12th time in the past 14 days. Both the Dow and the S&P 500 dropped another 4% on Thursday but the equities futures have recovered slightly overnight. Since Obama was sworn in Wall St. has fallen over 20%.
NFP:
The only thing that matters today is Non-Farm Payrolls. Most are saying this will be the worst NFP in 35-years. In my research for today's NFP event I see that some economists and banks are looking for a number around the -750K level, so keep that in mind. The exact consensus number the majority of banks are looking for is -698K with the Unemployment rate at 7.9%.
Here's what the banks are looking at for today's NFP:
NFP consensus range: -500K to -800K
Unemployment rate consensus range: 7.8% to 8.1%
My NFP forecast is for a print between -632K to -698K. For the Unemployment rate I'm forecasting a print between 7.8% to 8.0%.
I won't make any speculation on what the markets will do when this data comes out because no matter what the reaction to the data will likely cause an intense amount of both up and down volatility in all market. There is no way to predict any of this stuff.
My feeling is we may see an NFP print that beats market expectations. If the Fed wants to stop the slide on Wall St. now would be a great time to fudge NFP to print below the -600K level. The Fed and Treasury is well aware all Wall St. needs is an upside surprise on a big piece of data like NFP to scare the bears away and cause euphoria with the bulls.
Already this morning the rumors of a -1M print on NFP have started to circulate through the markets. With the Dow and S&P 500 being down week after week I can see these markets are perfectly set-up for a surprise at 0830 EST this morning. This should be a fun NFP.
EUR/USD--
In early London the euro remains slightly supported above the 1.2700 level. The key upside level I'm watching this morning is the 1.2724-1.2738. As long as we stay below that price zone I would expect at least a slight retrace from the run up the past few hours.
There's really not much to be said about Trichet's press conference. His behavior continues to be very odd lately and yesterday he seemed lifeless as he was explaining the abysmal situation in the Eurozone. Trichet made it blatantly clear the ECB is open to further reducing their key lending rate. Right now the ECB has one of the highest interest rates in the G20 but I find it hard to imagine Trichet will be able to keep rates at 1.50%. I expect a further reduction of at least 25bps.
For today the EUR/USD should remain tightly correlated with the S&P 500 futures. That index remains well supported below the 700 level and the door for the S&P 500 to fall towards the 600 level in the short-term is now open in my view.
That's about it for now. Obviously the risk of trading NFP is extremely high so I encourage all traders to sit on the sidelines if these conditions exceed your risk appetite. Euro key levels will be posted later this morning.
-David
I believe the move is mostly due to incredibly thin market conditions which was fueled by a number of prime stops sitting above 1.2650, 1.2700, and 1.2720. I would expect there to be a string of stops sitting all the way up to the 1.2820 level and with today's NFP, anything should be expected.
On Thursday the Dow closed down for the 12th time in the past 14 days. Both the Dow and the S&P 500 dropped another 4% on Thursday but the equities futures have recovered slightly overnight. Since Obama was sworn in Wall St. has fallen over 20%.
NFP:
The only thing that matters today is Non-Farm Payrolls. Most are saying this will be the worst NFP in 35-years. In my research for today's NFP event I see that some economists and banks are looking for a number around the -750K level, so keep that in mind. The exact consensus number the majority of banks are looking for is -698K with the Unemployment rate at 7.9%.
Here's what the banks are looking at for today's NFP:
NFP consensus range: -500K to -800K
Unemployment rate consensus range: 7.8% to 8.1%
My NFP forecast is for a print between -632K to -698K. For the Unemployment rate I'm forecasting a print between 7.8% to 8.0%.
I won't make any speculation on what the markets will do when this data comes out because no matter what the reaction to the data will likely cause an intense amount of both up and down volatility in all market. There is no way to predict any of this stuff.
My feeling is we may see an NFP print that beats market expectations. If the Fed wants to stop the slide on Wall St. now would be a great time to fudge NFP to print below the -600K level. The Fed and Treasury is well aware all Wall St. needs is an upside surprise on a big piece of data like NFP to scare the bears away and cause euphoria with the bulls.
Already this morning the rumors of a -1M print on NFP have started to circulate through the markets. With the Dow and S&P 500 being down week after week I can see these markets are perfectly set-up for a surprise at 0830 EST this morning. This should be a fun NFP.
EUR/USD--
In early London the euro remains slightly supported above the 1.2700 level. The key upside level I'm watching this morning is the 1.2724-1.2738. As long as we stay below that price zone I would expect at least a slight retrace from the run up the past few hours.
There's really not much to be said about Trichet's press conference. His behavior continues to be very odd lately and yesterday he seemed lifeless as he was explaining the abysmal situation in the Eurozone. Trichet made it blatantly clear the ECB is open to further reducing their key lending rate. Right now the ECB has one of the highest interest rates in the G20 but I find it hard to imagine Trichet will be able to keep rates at 1.50%. I expect a further reduction of at least 25bps.
For today the EUR/USD should remain tightly correlated with the S&P 500 futures. That index remains well supported below the 700 level and the door for the S&P 500 to fall towards the 600 level in the short-term is now open in my view.
That's about it for now. Obviously the risk of trading NFP is extremely high so I encourage all traders to sit on the sidelines if these conditions exceed your risk appetite. Euro key levels will be posted later this morning.
-David
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