Forex Technical Analysis for 12/10-12/14 Week

EUR/USD trend: sell.
GBP/USD trend: sell.
USD/JPY trend: buy.
EUR/JPY trend: hold.

Floor Pivot Points:
Pair	3rd Sup	2nd Sup	1st Sup	Pivot	1st Res	2nd Res	3rd Res
EUR/USD	1.4286	1.4405	1.4531	1.4650	1.4776	1.4895	1.5021
GBP/USD	1.9598	1.9889	2.0096	2.0387	2.0594	2.0885	2.1092
USD/JPY	108.01	108.78	110.23	111.00	112.45	113.22	114.67
EUR/JPY	158.77	159.83	161.76	162.82	164.75	165.81	167.74

Woodie's Pivot Points:
Pair	2nd Sup	1st Sup	Pivot	1st Res	2nd Res
EUR/USD	1.4407	1.4534	1.4652	1.4779	1.4897
GBP/USD	1.9889	2.0096	2.0387	2.0594	2.0885
USD/JPY	108.78	110.23	111.00	112.45	113.22
EUR/JPY	159.83	161.76	162.82	164.75	165.81

Camarilla Pivot Points:
Pair	4th Sup	3rd Sup	2nd Sup	1st Sup	1st Res	2nd Res	3rd Res	4th Res
EUR/USD	1.4521	1.4589	1.4611	1.4634	1.4678	1.4701	1.4723	1.4791
GBP/USD	2.0029	2.0166	2.0212	2.0257	2.0349	2.0394	2.0440	2.0577
USD/JPY	110.45	111.06	111.26	111.47	111.87	112.08	112.28	112.89
EUR/JPY	162.05	162.87	163.14	163.42	163.96	164.24	164.51	165.33

Fibonacci Retracement Levels:
Pairs	EUR/USD	GBP/USD	USD/JPY	EUR/JPY
100.0%	1.4770	2.0678	111.78	163.88
61.8%	1.4676	2.0488	110.93	162.74
50.0%	1.4648	2.0429	110.67	162.39
38.2%	1.4619	2.0370	110.41	162.03
23.6%	1.4583	2.0298	110.08	161.60
0.0%	1.4525	2.0180	109.56	160.89

Nonfarm Payrolls - What Will Be the Greenback’s Fate?

The USD was up against the EUR and held steady against its other European rivals early Thursday in New York as the Bank of England cut interest rates. The BoE’s Monetary Policy Committee cut its key interest rate to 5.5% from 5.75% yesterday, the first cut in 2 years, as evidences mounted that the economy is slowing. Overall, the USD remained relatively unchanged after the U.S. jobless claims fell. President Bush is set to unveil plans to help struggling homeowners to avoid foreclosure and this move is expected to help circumvent a U.S. economic recession. However the U.S. still faces a deteriorating housing market for at least another 6 months. Despite the greenbacks’ strong performance over the past 2 days, however, analysts cautioned against jumping on a dollar-recovery bandwagon too soon. There are still a lot of reasons for the EUR/USD to hold above 1.4500. Financial markets remain susceptible to bad news flow and rate differentials are unlikely to move substantially in the dollar’s favor too quickly.

Today, traders may expect USD moves to be choppy as the Nonfarm Employment Change figure is expected to be released. This is indeed one of the most market-moving indicators, and with the FOMC rate decision and policy statement looming on the horizon next week, equity markets could see wild price action. The change in the U.S. Non-Farm Payrolls for the month of November is anticipated to rise to 75K, down from 166K in October. However, following last Wednesdays’ surprising jump in the ADP Nonfarm Employment report, the Nonfarm Employment Change figure is difficult to predict. A weaker-than-expected reading could send EUR/USD towards 1.4750 once again, as traders increasingly bet that the FOMC will indeed cut rates next week. On the other hand, a surprisingly strong NFP report could help EUR/USD continue its descent towards 1.4350.

EUR/USD Unconcerned with U.S. Employment Data

EUR/USD was mainly ranging today as the markets were undecided whether it is going bullish or bearish expecting the release by U.S. BLS on the November employment situation. After quite optimistic release came out dollar bulls took their ride for a while, but then euro bulls started to push EUR/USD back up keeping it slightly above the average daily range.

Nonfarm payrolls - the main indicator of the U.S. employment situation was at 94,000 in November - an expected continuation of the last month 166,000 increase. But analysts were expecting just 70,000 growth, so the dollar now has some good news to grow on.

Unemployment rate left at the same rate as in October - 4.7%, while markets expected growth to 4.8%. Average hourly earnings increased by 0.5% compared to 0.3% - the average forecast for this indicator.

Intensive Correction Move For the Greenback

Dollar bulls took their chance yesterday following the release of a report that showed a marked rise in private-sector jobs, giving the greenback a lift against its major rivals. Yesterday, the U.S. currency gained 1% against the EUR, 0.9% versus the JPY and 1.6% against the GBP.
The USD strengthened yesterday after reports showed that U.S. job growth and factory orders quickened, both of which are reducing concerns that the world’s largest economy will head into a recession. The Labor Department said worker productivity rose the most since 2003, while labor costs posted the biggest drop in 4 years. A report from ADP Employer Services showed companies last month added 189,000 jobs, more than triple the average forecast, prompting economists to raise estimates for the government’s payroll report scheduled for release tomorrow. The surprise jump in the ADP Nonfarm Employment report suggests that we could see a better-than-forecast reading of Friday’s Nonfarm Payrolls number, prompting the market to trim back chances of a 50 basis points interest rate cut by the Federal Reserve next week.
Futures contracts show that the odds of a 0.5% point cut by the Fed are currently standing at 42%, down from 48% yesterday. Futures are pricing in a 58% chance of a 0.25 point cut to 4.25%.
Part of the reason for yesterday’s stronger dollar is also the hope that Treasury Secretary Paulson will announce an Interest Rate freeze on subprime mortgages today, thus saving many homeowners from foreclosure. If this manages to work, we could have some respite for the US economy.

As for today, there is only an Unemployment Claims figure expected from the U.S. market. The expectations are currently standing at 335K, 17K down from the previous month’s one.

Canada Dismisses Currency Peg

Unnerved by the tremendous appreciation in its nation’s currency, Canada’s Parliament is officially mulling the possibility of pegging the Loonie to the USD. It’s unclear at what value the two currencies would be linked, perhaps at parity. However, in testifying before Parliament, the future leader of the Bank of Canada argued staunchly against such an exchange rate regime. Such a relationship, he warned, would cripple Canada’s ability to conduct monetary policy, independent of the US. So long as the Loonie remained fixed to the Dollar, Canada would be forced into mirroring US interest rate movements. Because of several fundamental differences in their respective economies, it seems unlikely that this policy will be implemented. The CanWest News Service reports:

"It would mean that, de facto, Canada would adopt U.S. monetary policy, despite the reality that the structures of our economies are very different and, as a consequence, often require different types of adjustments in response to global developments."

US ADP Nonfarm Date On Tap

Yesterday was void of any significant news from the U.S, so the greenback did not experience much movement against the EUR. However the greenback did strengthen noticeably against the CAD on the back of the unexpected Canadian interest rate cut to 4.25%. The main market movement yesterday was still driven by comments by the Fed that the subprime crisis will have a significant drawback on U.S growth. This attitude by the Fed has unsettled the financial markets again and shoved global stocks lower, leading to a risk-averse attitude by investors and a subsequent reversal of carry trades. Therefore the USD saw most of its action yesterday against the high yielding currencies, where it gained noticeable ground on the back of the carry trade reversal. On the other hand the greenback lost ground against the JPY as the increasing concerns about the credit crisis prompted investors to cut back on risky positions.

Looking ahead, today is filled with significant U.S data which may prompt some dollar movement. The most important news out today will be the ADP Nonfarm Employment Change which is expected to release well below its previous figure of 106K at 50K. This figure will be closely watched by investors for an indication of where Friday’s all important NFP report will release, even though the accuracy of the ADP remains questionable. If this figure surprises on the upside the dollar could claw back some lost ground against the EUR. However although there is a string of data releases expected today it seems that the market will remain cautious ahead of Friday’s NFP report, but is also important to note that the increasing speculation of an aggressive rate cut by the Fed could shove the greenback onto its recently familiar slippery slope.

Dollar Stronger Against Euro, Pound

Dollar started to trade higher today against euro after the productivity report by the Bureau of Labor Statistics came out, as it was trading against pound sterling earlier in the morning after some bearish data on United Kingdom PMI and housing were released.

Nonfarm productivity (revised value) in third quarter of 2007 increased unexpectedly well - by 6.3%. Previous value was 4.9% and the analysts' expectations averaged at 5.8% growth. This indicator without any doubts will continue to strengthen dollar until the end of the week.

Factory orders in October also showed a growth that almost no one could see happening - 0.5%, while analysts' consensus was at 0% stagnation.

Bad news came with non-manufacturing ISM report which showed today that November Business activity index in services sector declined to 54.1% from 55.8% in October, which worse drop than it was expected - 55.0%.

Crude oil inventories again were in the red zone, but today with a very high negative value - 8 million barrels drop compared to previous week report. Combined with today's OPEC decision not to increase oil output, this news may hit dollar as the oil prices will surge to the new maximums.