The weight of recession is a reality that many of the world’s largest economies are already living with; but for the currency market, relative health is of greater fundamental significance than any absolute measures of economic health. This is the frame of mind we should be in when approaching the prospect of another five hundred thousand-plus jobs cut from American payrolls last month when speculating the impact the well-known market-moving Non-Farm Payroll (NFP) report could have of the US dollar. And, with the greenback struggling to regain its footing against the euro, British pound and Japanese yen; a hit to growth forecasts of this magnitude could certainly redefine the currency’s long-term trend.
A better than expected Euro-Zone retail sales report woke up currency markets which had been consolidating ahead of the U.S. Non-Farm payroll report. The Euro jumped 50 bps when the consumption report showed a 0.6% gain in November versus expectations of flat sales.
Increased volatility throughout the forex market held the CADJPY in a 400+pip range throughout the week, and as risk sentiment continues to dictate price action for currencies, the technical forecast favors a bearish outlook for the pair.
Forex traders are likely to look past the European economic calendar as most of the upcoming news likely to have already been priced into the market, eyeing a dour US Non Farm Payrolls report that is set to show the economy shed 525 thousand jobs in December. Overnight, Japan’s Leading Index fell to a decade low, suggesting the recession in the world’s second-largest economy deepening
The U.S. economy is expected to have lost another 515,000 jobs in December which would total over a million jobs for the last two months of the year. If Wednesday ADP report which reported a loss of 693,000 jobs is any indication then we may see a larger than expected print when the report hits the wires at 13:30 GMT.