Currency Market Consolidates Throughout The U.S. Session

Overall, the currency market moved on increased volume on Thursday, as the economic calendar of the U.S. session was loaded with top tier releases. Among them, the NFP and the ECB press conference were the two most important, but so far it seems that the market has priced-in the weaker than expected data from the labor market beginning with the overnight session. As such, the major pairs moved mostly side-ways after the 8:30am EDT releases, even though the S&P futures and the commodity market declined at a sustained pace during this period.

The Euro (Eur/Usd) moved most of the time lower on Thursday, something that caused the pair to decline as much as 160 pips and test the 20-day moving average. Moreover, the pair retraced on Thursday every pip it gained the prior day, on Wednesday. During the European session, the euro-area unemployment rate was released at 9.5%, the highest rate since 1999. Moreover, the unemployment rate has been moving higher for more than a year, in which the economy has shed a huge number of jobs. A different report from the euro-area showed that the price producers pay for raw goods has decreased for the tenth consecutive month in May

The Pound (Gbp/Usd) had a very weak overnight session, declining the most among the major currencies. Soon after, the pair turned around and retraced most of the declines seen earlier in the day. During the European session, the BoE released the Credit Conditions Survey, but as expected, this release had little implications on the currency market. Moreover, the Construction PMI was released at 44.5, the first decline posted in the last three months.

The Aussie (Aud/Usd) moved only lower during the Asian and the European sessions. Throughout the U.S. trading hours, the pair continued the downside momentum shortly after the 8:30am EST releases, but afterwards developed a 25-pip side-ways channel. If nothing out of the ordinary happens, the aussie will probably continue trading in this tight range throughout Friday’s Asian session.

The Cad (Usd/Cad) almost came to a standstill during the first part of the day, but then surged higher, moving in a similar fashion with the other major pairs. Moreover, the cad bounced from an important point during the European session, formed by the support area of a 4-hour channel, and from the 50-day moving average. The cad rose 120 pips on Thursday.

The Swissy (Usd/Chf) reached TheLFB R1 (1.0850) area during the overnight session, but since then the pair has failed to move any higher. Moreover, the same 1.0850 area represents a major swing point for the pair’s price action. On the daily chart, the swissy is trading slightly below the 20-day moving average. During the early part of the European session, a member of the SNB voting committee made a public speech, moving the pair very little.

The Yen (Usd/Yen) re-tested the resistance area formed by the 20 and by the 50-day moving averages during the early overnight session, but as expected, the yen failed to break any higher. As the market headed towards the U.S. session, the yen began tumbling at a strong pace along with the S&P futures.

U.S Equity Markets Decline Following The Labor Market Data

Current Futures: Dow -178.00, S&P -21.50, NASDAQ -29.75

U.S. markets declined at a sustainable pace on Thursday after the Non-Farm Payroll showed that the labor market is still struggling.

The global equity markets traded on weak momentum even from the European session, as the major regional indexes were falling close to 2% from the first few hours of trading. This, in turn, sent the S&P futures lower, which were down around 0.8% ahead of the NFP release. As the worse than expected NFP numbers hit the wires, the S&P futures tumbled another 17 points, which made the pair broke below the 900.00 area. Since then, the S&P futures traded relatively flat, but still below the 900.00 area.

Data coming from the labor market continues to disappoint investors, something that made a rather large number of investors switch from the bulls to the bear’s camp. The latest numbers for the month of June showed that the economy lost 467K jobs, while the unemployment rate surged to a 26-year high of 9.5%. At the same time, a report showed that the unemployment claims remain above the 600K benchmark for almost five consecutive months.

The poor labor market has wide implications throughout the U.S. economy. The two biggest problems with a rising unemployment rate are seen in the credit and in the retail markets, both represent major problems for the global economy at this point. Historically speaking, there is a strong relationship between the unemployment rate and the default rate on mortgages, TheLFB-Forex.com Trade Team noted, since jobless persons cannot pay their debt anymore. To add more problems into the mix, the high level of default rates was one of the main problems that led the U.S. economy into the credit crisis. The second problem with a rising unemployment rate is that it cuts spending, since consumers will now be more likely to start saving for their financial safety, and cut unnecessary expenses, such as the discretionary spending.

The Dow Jones Index fell 174.65 points (2.05%) to 8,329.41, while the S&P 500 index declined 21.10 points (2.29%) to 902.23.

Crude oil for July delivery was recently trading at $66.90 per barrel, lower by $2.30. So far on Thursday, the pair declined $3, among the biggest one-day declines of the last few months.

Gold for July delivery was recently trading lower by $10.30 to $931.00. With today’s decline, gold retraced every dollar gained the prior day, on Wednesday.

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com

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