The Euro pierced the psychological 1.20 support level, sending the single-currency to a 4-year low. The began its slide early Friday morning, driven lower by fresh fiscal problems from Hungary and a weak U.S. payroll figure. Concerns about Hungary’s fiscal situation initiated the break before the New York opening, while the U.S. jobs data helped accelerate the move to the downside. The market weakened throughout the day as traders shied away from risky assets, instead favoring the safety of the U.S. Dollar.
Technically the Euro remains in a downtrend. Friday’s move to the downside was likely sell stops following the initial plunge and fresh selling once traders became convinced the U.S. jobs data was bearish and the intra-day tone would remain bearish for the duration of the day. The longer-term monthly chart suggests that the next likely downside target is the November 2005 bottom at 1.1638. Bearish traders are likely to defend the old bottoms at 1.2153 and 1.2143 in order to keep the pressure on the market.
The U.S. Dollar Index made a new high for the year, boosted by the sharp sell-offs in the Euro, British Pound and the commodity-linked currencies. Gains were limited slightly by the rise in the lower-yielding Japanese Yen.
The initial catalyst behind the U.S. Dollar’s rise on Friday was the news that Hungary is in the midst of a fiscal crisis of its own. This news caught many traders by surprise because most were focused on the upcoming U.S. Jobs Data Report. After the first thrust to the upside, gains were extended when the government reported that the number of jobs created during May fell far below the consensus.
Economist estimates were for an increase of about 513,000 new jobs. The U.S. Labor Department reported an actual increase of 431,000. This news was bearish in itself, but the traders were really surprised when the internals of the report showed that of the 431,000 new positions, 411,000 jobs were created by the U.S. government. This figure was primarily made up of short-term census workers.
The weaker-than-expected U.S. employment report helped trigger a flight-to-safety rally in the Dollar while driving investors out of commodity-linked currencies. Aversion to risk weakened U.S. equity and global commodity markets, helping to drive up demand for the lower-yielding Japanese Yen. All three major commodity-linked currencies – Australian Dollar, New Zealand Dollar and Canadian Dollar – suffered huge losses, leading to speculation that this trend is likely to continue next week.
Local: 312-896-3930
Toll Free: 800-971-2440
Email: Info@BrewerFX.com
Website: www.BrewerFX.com
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from B.I.G. Forex, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as “spread” or “straddle” trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.
