US Non-Farm Employment to Set Today’s Pace

The U.S. Non-Farm Employment Change Data is set to be published at 12:30 GMT, and is expected to be the most important news event when it comes to market volatility. Traders are also advised to follow the G20 Meeting that will commence today, and the U.S. Unemployment Claims data at 12.30 GMT. In the meantime, open your positions in the majors now, as today’s trading gets under way.

The U.S. Dollar was slightly stronger vs. the EUR on Thursday, as investors squared positions ahead of the U.S. Non-Farm Payrolls report later today. The USD also traded near a week low against the British Pound before a U.S. government report forecast to showed employers eliminated fewer jobs last month, sapping demand for the greenback as a refuge from the global recession. The USD traded at $1.6323 per pound from $1.6275 yesterday, after falling to $1.6413, the lowest level since Aug. 25.

The greenback briefly extended gains against the Japanese Yen on Thursday, after the Institute for Supply Management said its services index rose to 48.4 in August from 46.4 in July. The U.S. currency finished trading at 92.58 Yen from 92.28 Yen, and is poised for a 4th weekly loss, the longest stretch since December.

Today’s Non-Farm payrolls data is expected to have a strong impact on the U.S currency. Any result could be a surprise, and the Dollar could go either way as a result. In any case, traders are unsure how the market will react to today’s data. A weak report could feed risk aversion, boost Treasuries and actually aid the U.S Dollar. Then again, a better than expected result might be seen as a sign of relative U.S. economic strength, and lift the Dollar. Or it could also encourage risk-taking and aid commodities and higher-yielding currencies at the Dollar’s expense.

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Daily Forex Tips - September 4th 2009

The Canadian Dollar and U.S. Dollar are expected to be at the forefront of trading today.
Opening large positions in both of these currencies could bring you large profits, as this week’s trading comes to a close.

11:00 GMT - CAD Unemployment Rate

The percentage of the workforce that is unemployed, and who is actively seeking employment during the previous month.

Important indicator of economic health, as consumer spending is highly correlated with the labor market.

If the actual end result is lower than the forecasted 8.7%, this may push-up the Canadian Dollar

12:30 GMT - USD Non-Farm Employment Change

Change in the number of employed people during the previous month. Expected to be slightly better at -223,000, from the previous reading of -247,000.

Job creation is a leading indicator of consumer spending, which accounts for a majority of overall economic activity.

This is vital economic data, and is expected to have a strong impact on USD trading today.

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Traders Will Focus on the US Unemployment Claims Today

The U.S dollar gained ground Wednesday against the EUR and the British pound, after strong data on orders for new U.S.-made durable goods and new home sales comforted expectations of an improvement in the economy. The greenback traded higher after the durable-goods orders report said orders for July rose by 4.9%, the largest increase in 2 years.

Investors will be watching for the new U.S. jobs report today before making significant moves. Today Traders Focus on the U.S Unemployment Claims The Dollar rallied yesterday against most of its major counterparts after data suggesting the slowdown in the U.S. housing market has bottomed out. A better-then-expected result gave further support to the U.S. currency. The Dollar has been sold off recently partly due to growing optimism regarding the state of the U.S. economy. The USD finished yesterday’s trading session about 50 pips higher against the EUR at the1.4249 level.

Yesterday’s main U.S economic event was the New Home Sales data. New U.S. home sales hit its highest level in 10 months in July. Orders for Long-Lasting Manufactured Goods also surged yesterday and are interpreted by traders as fresh evidence of a modest economic recovery. Sales of “New Single-family Homes” rose by 9.6% from June, the highest rate since September. It is in fact the biggest percentage gain since a matching increase in February 2005, another indication that housing activity had stabilized after a three-year slump.

Looking ahead to today, there are few important news releases coming out of the U.S. These include the Prelim GDP and Unemployment Claims at 12.30 GMT. Traders will be paying close attention to today’s announcement as a stronger than expected result may continue to boost the USD in the short-term. On the other hand, if the results turn out to be lower than forecast, then the Dollar may record a fairly bearish session in today’s trading.

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Brazil Real Edging Up, Despite Efforts of Central Bank

The Brazilian Real has been one of the world’s best performers in 2009, having risen by a solid 25%. The currency is now close to pre-credit crisis levels, and is even closing in on an 11-year high. When you consider that only six months ago, most analysts were painting doomsday scenarios and predicting currency devaluations and bond defaults for the entire continent, this is pretty incredible!



The currency’s rise has been supported by a variety of factors, few of which are grounded in fundamentals. To begin with, while Brazil has staved off depression, it’s not as if the economy is firmly back on solid footing. The economy contracted by 5% in the first quarter, and forecasts for 2009 GDP growth still vary widely, from a slight contraction to modest expansion. Meanwhile, the economy is importing more than it exports, despite the rebound in commodity prices. “The central bank said the net trade result was based on $9.89 billion in receipts for exports and $12.72 billion in import payments overseas.” “Investment inflows, meanwhile, totaled $33.88 billion, while outflows totaled $29.78 billion.” The disparity between investment and trade data goes a long way towards explaining the Real’s rise. Thanks to a recovery in risk appetite, foreigners have poured cash into Brazil at an even faster rate than they once removed it. As a result, Brazil’s “Bovespa stock index has risen 51 percent this year, the world’s 12th-best performer among 89 measures tracked by Bloomberg, as foreign investors moved 13.7 billion reais into the market through July, the most since the exchange began tracking data in 1993. Brazilian local bonds returned 37 percent in dollar terms after falling 13.8 percent in 2008.” The country’s foreign exchange reserves also just set a new record, surging past the $200 Billion mark. Brazilian interest rates tell the rest of the story.


Despite a gradual decline over the last decade (made possible by a moderation in inflation), Brazil’s benchmark SELIC rate stands at a healthy 8.65%, which is the highest in South America, after Argentina. Unlike Argentina - and the dozen or so other economies around the world that boast equally lofty interest rates - Brazil is perceived as relatively safe place to invest. Given interest rate levels in the western world, combined with the expectation that Brazil’s currency will appreciate further, investors are more than happy to accept a little bit of risk in order to earn an out-sized return. Just like the Bank of Korea, Bank of England (both profiled by the Forex Blog in the last week), the Bank of Brazil is not happy with the resilience in its currency. “Brazil’s central bank said on Wednesday it bought $779 million on the spot foreign exchange market this month to Aug. 7 as dollar inflows to the country surged because of growing demand for local stocks and bonds.” This brings the total intervention expenditure to $9 Billion. Unfortunately for the Bank of Brazil, the forces in the forex market are way beyond its control. “Dollar inflows to the country totaled $2.26 billion this month to Aug. 7, compared with inflows of $1.27 billion in all of July.” Analysts are also unconvinced, and are racing to revise their Real forecasts upward. One economist, caught completely off guard, just “changed his year-end real forecast to 1.8 from 2.5 at the start of the year. ‘The resilience of the Brazilian economy to weather this crisis has been spectacular,’ ” he explained.

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US Non-Farm employment Change To Set The Pace Today

The U.S. Dollar is expected to go extremely volatile today on the release of the ever so important U.S. Non-Farm Employment Change at 12:30 GMT. The other releases that are expected to drive trading between the USD and its main crosses today are the British PPI Input at 08:30 GMT, the U.S. Unemployment Rate at 12:30 GMT, and the Canadian Unemployment Rate at 11:00 GMT.

Forex traders are advised to open their USD positions now, prior to the release of the vital economic data from the leading economies. Nonfarm Payrolls The U.S Dollar rose broadly yesterday against the GBP and EUR, due to uncertainty about the global economic outlook, and a renewed bout of risk aversion ahead of a key government report on the U.S. labor market due today. By yesterday’s close, the USD rose against the GBP, pushing the oft-traded currency pair to 1.6769. The Dollar experienced similar behavior against the EUR, and closed at 1.4360.

A leading indicator released yesterday from the U.S was the Unemployment Claims report. Data showed a drop in U.S. weekly jobless claims failed to support expectations that the labor market and the economy were stabilizing. The report showed claims fell by 38000 to 550000 last week, the fifth straight time claims were under 600000, after being above that level since January. The other factor that led to the bullish Dollar yesterday was that U.S stocks fell, which boosted demand for the USD as a safe-haven currency.

Moreover, renewed demand for the Dollar comes after a sharp drop earlier in the week, when the greenback hit multi-month lows versus the EUR, as investors favored foreign currencies and other riskier assets such as equities. Looking ahead today, the news event that may have a very large impact on the Dollar and its main currency pairs in today’s trading is the Non-Farm Employment Change at around 12:30 GMT. This report is very important as it is likely to impact Dollar volatility. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow this release.

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High Volatility Expected A Head of Data Packed Calendar Week

The economic calendar is filled with high impact data this week that threatens to sow large volatility into the market. From the wide range of news reports, ForexYard advises its traders to pay special attention to the U.S Manufacturing PMI, Pending Home Sales, Non-Farm Employment Change and EUR Minimum Bid Rate reports.

High Volatility Expected this Week Last week the Dollar saw mixed results against the major currencies. The USD underwent extremely volatile sessions against the EUR and the Yen, yet the pairs rapidly returned to former rates by Friday’s close after the US and Canada released their GDP figures.

It appears that the mixed results which were received from the U.S leading economic indicators were the main reason for the Dollar’s harsh volatility, experienced last week. On Monday, the New Home Sales report, which measures the annualized number of new single-family homes that were sold during the previous month, delivered the highest figure in 7 months. In addition, the Core Durable Goods Orders index, a leading indicator of production, delivered the third consecutive positive figure. However, aside from these positive reports, the Conference Board’s Consumer Report, which was released on Tuesday, showed that the U.S consumers are still cautious regarding their expenses.

Usually, the more secure the consumers feel, the better the economy is doing. The weekly Unemployment Claims also delivered negative figures, as 584,000 individuals lost their jobs during the past week. As for this week, an extremely busy trading week is impending. The leading economic publications for the week will be the Manufacturing Purchasing Managers’ Index, the Pending Home Sales, the ADP Non-Farm Employment Change, the weekly Unemployment Claims, and of course, the Non-Farm Payrolls on Friday.

This week promises to create large volatility for USD pairs, which will provide traders many opportunities to create high profits.

Canadian Dollar Slated to Outperform Other Commodity Currencies

In the same vein as Monday’s and Tuesday’s posts (covering the New Zealand Dollar and Australian Dollar, respectively), I’d like to use today’s post to look at another commodity currency - the Canadian Dollar. The Loonie, it turns out, has also benefited from the a recovery in risk appetite and concomitant boom in commodity prices; it has appreciated by 7% against the USD in the last month alone, en route to a ten-month high. “All in all, with almost everything going its way these days (besides the crummy weather and the impact on tourism), a return trip to parity - last visited nearly one year ago - doesn’t seem far fetched,” chimes one optimistic analyst.

Like Australia and New Zealand, Canada’s economic fate is tied closely to commodity prices. Simply, as oil and other natural resources have inched closer to last year’s record highs, the Loonie has rebounded proportionately. “Raw materials account for more than 50 percent of Canada’s export revenue. Crude is the nation’s largest export.” Of course, this relationship works both ways. Any indication that the global economic recovery is stalling, and commodities prices would likely tumble, bringing commodity currencies down likewise.

Unlike the Australian Dollar and New Zealand Dollar, the Loonie has never really held much appeal as a carry trade currency. Even at their peak, Canadian interest rates were mediocre, from the standpoint of yield. The current rate is a measly .25%, compared to 2.5% in New Zealand and 3% in Australia. Moreover, while Australia may begin tightening as soon as the fall, “The Bank of Canada committed to keep its key policy rate at the lowest possible level until the spring of 2010,” after voting to hold rates at yesterday’s rate setting meeting. This interest differential could explain why the Aussie has outpaced the Loonie of late.

Another key difference - and potential explanation for the currencies’ recent divergence - is that Australia is considered part of the Asian economic zone, while Canada’s economic fortunes are closely aligned with those of its main trading partner, the US. China, alone, is helping to lift Australia out of recession. The US, meanwhile, is still struggling to find its feet. Hence, it is projected that Canadian GDP will contract by 2.3% in 2009, while Australian GDP may fall by a modest .5%. “When things look bad, you are more likely to sell Canada than the Australian dollar because its economy is moderated by Asian growth,” explains one analyst.

Going forward, this regional differentiation could actually work to the advantage of Canada, which is forecast to grow by an impressive 3% in 2010, compared to 1% growth in Australia. Accordingly, one analyst advises that “Investors should sell Australia’s dollar against Canada’s as a ‘relative commodity play’ because an attempt by China to reign in bank lending on concern it may be creating asset-price bubbles could slow Asian growth…’The Canadian dollar should outperform because it is much more closely linked to a recovery in the U.S.’ “

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