by Lena
9. February 2009 00:47
With payroll data out of the way and traders waiting in anticipation
for this week’s events, there is a feeling amongst market participants
that this week may be important for the dollar's direction. It finished
near its lows against the euro on Friday night, after the bad economic
data out of US showed that -598.000 was lost in the space of one month.
With unemployment rising and the ISM manufacturing contracting for
several months now, it is clear the economy is deteriorating and may
continue to do so for the time being.
The EUR/USD was trading
heavily on Friday after the payroll data release, and there was a lot
of choppiness in the pair due to investor uncertainty. The pair broke
on the upside after the London closing but the move was not strong
enough to reach 1.3030, which worked as good resistance. The next level
to watch for now is 1.2870 which if gives way, may open the way for
1.2830 ahead of 1.28. Today with no important economic data out of
either Europe or the US, we may see some consolidation in the pair and
the ranges for now may be tight as traders will want to prepare for the
week’s events.
The non-farm payrolls did not provide us with any
further direction regarding the market outlook, as investors already
knew the severity of the economic situation and how bad things are;
however the fact that in a space of three months we had more than
1.5million jobs lost, makes everyone wary and reluctant to believe
things may get better in the coming months. After it was announced by
Obama's administration that a new rescue plan is in motion, investors
found some kind of confidence that the new government is ready to take
things to the next level and tackle America's economic trouble. We saw
a brief rally in futures, equities and commodities, however it did not
last long as the risk aversion returned in the markets and traders
exited their risky assets once again.
Today's economic calendar
is empty of important economic data; therefore as it is the Monday
after the payroll data we may see some consolidation in the currencies
and traders getting positioned for a busier week. With Bernanke’s
testimony in front of the Senate tomorrow and retail sales out of the
US later this week, traders will have the chance to weigh all economic
events and decide which way they want to go for now. All eyes and ears
will be upon Bernanke and his speech about the economic crisis and ways
to solve the credit crunch, but if his words don’t provide any comfort
for markets participants, we may see another wave of risk aversion
taking over and dollar together with the yen gaining in the aftermath.
Let’s
see how this week will play out and if tomorrow's testimony provides us
with more clues as to what the economic future holds. Don’t forget that
for now, the trading environment is very fragile across the board and
therefore any rallies in all markets can eventually lead in sell-offs,
as the sentiment is bearish and may be here to stay…