Despite the return of liquidity with the first full week of trading, it is clear that the markets have yet to find a resolution on risk sentiment and the demand for yield. However, as long as bailout efforts fail to pick the global economy up from its recession and interest rates keep their course towards zero, risk appetite and the carry trade will hold near multi-year lows.
The euro, US dollar, and Japanese yen face hefty event risk next week as the European Central Bank is anticipated to cut interest rates and Federal Reserve Chairman Ben Bernanke is scheduled to speak on the financial crisis and policy response. Based on past experience, comments by central bank chiefs tend to be some of the biggest market-movers out there, which should keep forex, stock, and fixed income traders on their toes.
-euro / dollar 1.31 is support below 1.33 -USDJPY resistance at 92.00/30 -GBPUSD fails shy of 1.53...again -USDCHF may have found bottom at 1.0861 -AUDUSD bearish on decline below .6956
It is hard to find solace in an indicator that meets expectations when it is the US non-farm payrolls (NFPs) showing more than a half million jobs lost through a single month. However, with a market that was fully discounting such a harsh number (perhaps a little worse through unofficial channels), such data at least does not come as too significant a surprise. Nonetheless, the steady plunge in employment inevitably lowers the fundamental outlook for the US economy going forward; and moreover, it puts the US dollar further behind the recession curve than its global contemporaries.
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