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The US Payrolls Shock Market In Huge Decline

A guest post written by DAR Wong

Currency Market Observations – 04 June 2012

Fundamental Outlook

The US non-farm payrolls rise disappointingly at only half of the median forecast. DJIA stocks decline while dollar recedes against on European currencies. Japan yen begins to swell again as safe haven after investors lose confidence in euro debt woes. The Eurozone is in chaos with disruption of further bailout for Greece until June while Spanish 10-year bond yields have reached almost 7 percent record high.

The US Conference Board’s index decreased to 64.9 in May from a revised 68.7 in April. Another report from S&P/Case-Shiller index of property values showed home prices in 20 cities dropped 2.6 percent in the 12 months ended March. The US pending home resale dropped 5.5 percent in April following a revised 3.8 percent gain the prior month, indicating uneven road to recovery.

The GDP growth for Q1 in US economy climbed at 1.9 percent annual rate, down from a 2.2 percent prior estimate. Initial jobless claims increased by 10,000 to 383,000 in the week ended May 26 from a revised 373,000 the prior week. Data suggest the economy may be cooling down.

On Friday, American non-farm payrolls climbed by 69,000 in May against a forecast of 150,000 advancement. Jobless rate rose to 8.2 percent from 8.1 percent. Stocks plunged amid dollar reversion down after data release. The plunging fear is expected to spread into Asia in coming early week.

Japan’s unemployment rate increased to 4.6 percent in April from prior month 4.5 percent. Retail sales fell 0.3 percent from March as resurging yen values slows down in recovery. Another separate report showed industrial production gained very small at 0.2 percent in April v. prior month gain of 1.3 percent, thus increasing worries among investors on contagion spread from Euro debt woes.

Eurozone submerges in deepening debt woes which have affected slowdown in major trade partners like the US and China. Greece remains as focal debate for the centre of debt bailout while Spanish 10-year bond yields have approached 7 percent that hit red alter level. International Monetary Fund (IMF) is not preparing financial aid for Spain since no call for bailout has been heard.

Market investors are worried about the recent meltdown of Euro value and the enlarging debt figures that may explode soon. Unemployment in the 17-nation Eurozone was at 11 percent in April that stood at highest record since 1995. Euro leaders are blaming Germany for refusal to participate in bolder role for bailing out the sick economies.

German’s seasonally adjusted jobless rate declined to 6.7 percent in May from prior month 6.8 percent after revisions. Another separate report showed inflation rate in the 17-nation euro area fell to 2.4 percent from 2.6 percent in April.

Technical Forecast

USD/JPY plunged after mid last week beneath 79.00 supports after reacting to Euro debt worries. On Friday, yen rose rapidly and the dollar receded to 77.65 after US job figure released. This week, we have abandoned the view for picking long trades and reckon the trend will move sideways from 77.50 – 78.50 regions. Beware of breaking below 77.50 again that may try lower support at 76.50 levels.

EUR/USD also broke our 1.2500 supports and reached 1.2286 low last week. This week, we reckon the market will trade inside 1.2300 – 1.2600 regions if dollar takes lead in receding from recent high. However, the possibility of our previous forecast to test 1.2150 low is within reach once the trend violates beneath 1.2280 should there be more continual negativities from Europe.

GBP/USD dived down to 1.5268 low last week after breaking the 1.5600 supports. We reckon the market will be supported at 1.5250 regions as it begins to trade sideways this week. The trend should be consolidating from 1.5250 – 1.5550 levels in near future if the trend halts further decline below 1.5250 benchmarks.

Dar Wong

This post is contributed by OPF Guest Blogger, DAR Wong.

Wong is the founder and Principal Consultant of PWForex.com and holds a professional
qualification in NASD series 3 and 5 approved by National Futures Association (USA).

 

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DISCLAIMER: This post is written for general information only. The author, publisher and/or any third party involved in the distribution of this work assume no legal responsibilities and shall have no liability whatsoever for any direct or consequential losses, costs or expenses arising from the use of the information contained herein.

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