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06/06/2014: Trading outlook ahead of Non-farm Payrolls and the US session

In forex trading, the dollar is regaining a bit of poise after yesterday’s sharp decline (see the chart of Dollar Index below). The euro is losing ground again, whilst sterling is also falling away slightly and the yen is paring back some of its earlier strength. It is only really the two southern commodity currencies, Aussie and Kiwi dollars which remain strong against the greenback. Despite this though trading has been rather subdued and should be until 13:30BST.

DXY   06062014

We are yet to see the traditional drift towards neutral on the European markets as the DAX and FTSE 100 hold on to their earlier gains. Gold has also held up well today. Interestingly, the sovereign debt yields that had been pushing strongly higher have once again started to turn lower again since Draghi announced his monetary easing measures yesterday. The rebound looks to have been another chance to sell on yields (ie. buy Treasurys).

Non-farm Payrolls though is clearly the attention for all traders today. After the ADP number (private payrolls) disappointed with just 179,000 on Wednesday (210,000 had been expected) this could suggest a downside risk to today’s payrolls which is forecast at 218,000. Of interest will also be the unemployment rate which is also expected to increase slightly to 6.4%. This would not necessarily be a bad thing as it could reflect the number of people returning to the labor force, so we must also therefore watch the participation rate for signs of improvement too.

The key overhead barrier is now at $1.3670 on EUR/USD. This was yesterday’s high and was almost to the tick the neckline of the large top pattern. A failure today to breach this level would suggest the selling pressure could be returning as the medium to longer term outlook would imply Euro weakness now.

Aside from that we await direction that will be given by Non-farms. Expect volatility to increase significantly this afternoon after Payrolls. As ever though, watch out for the initial spike in markets that is usually retraced after about 15 minutes and gives another chance to enter the trade.

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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.