Initial Jobless Claims Jump, Pushing USDJPY Lower and Stoking Risk-Aversion

UPDATE: USD Initial Jobless Claims (OCT 13) > 388K versus 365K expected, from 342K (revised from 339K) > USDJPY BEARISH

Was last week’s incredible Initial Jobless Claims print a fluke? It looks like it. After coming in at 339K, the reading was revised higher to 342K and this week’s reading came in at 388K, well-above the prior and the expected outcome of 365K. Additionally, there was a drop in the Continuing Claims figure, from 3281K to 3252K (versus 3275K expected).

This is a confusing mixture, but it does suggest one thing: as new labor market participants seek unemployment benefits, old labor market participants are dropping out of the labor force (hence rising initial claims and dropping continuing claims). This necessarily suggests that the US participation rate is dropping, a sign of labor market weakness. While this may lead to a drop in the Unemployment Rate when the October labor market readings come out in two weeks, it may not be a “healthy” drop.

USDJPY 1-minute Chart: October 18, 2012

Charts Created using Marketscope – Prepared by Christopher Vecchio

Following the release, the USDJPY, already trading at a one-month high, fell back from 79.31 to as low as 79.22. Although the pair rebounded shortly thereafter, the USDJPY has continued to fall back (confirming the sentiment that the labor market isn’t improving based on this print) and was trading at 79.26, at the time this report was written. Elsewhere, the AUDUSD dropped from 1.0382 to as low as 1.0359, while the EURUSD fell back from 1.3106 to as low as 1.3090 before rebounding back to 1.3100.

--- Written by Christopher Vecchio, Currency Analyst

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