Mid−Day Forex Technical Report − Indecisive Market after NFP

Fri, Apr 4 2008, 13:25 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Indecisive Market after NFP

Non-Farm payroll showed the third consecutive month of contraction in the US job markets by falling -80k in march, even worse than expectation of -50k. Even worse than that, Feb's data was revised down from -63k to -76k, Jan's data was revised sharply lower from -22k to -76k. That adds up to a total of -232k contraction in the employment market in Q1. Unemployment rate, on the other hand, surged sharply from 4.8% to 5.1%, even higher than expectation of 5.0%. The deteriorating job market provides incontrovertible proof of recession in the US economy.

Market's reaction to today's NFP is indecisive so far. Dollar spikes lower right after the release but quickly recovers, in particular against Sterling. The Japanese yen also surges on risk aversion. As dust settles, further weakness is likely to be seen in the USD/JPY and also the USD/CHF.

Also released in US session, Canadian unemployment rate unexpectedly climbed from 5.8% to 6.0% in Mar. though the Canadian economy still recorded 14.6k job growth, similar to consensus expectation.

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USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 101.90; (P) 102.43; (R1) 102.78; More.

USD/JPY's retreat from 102.94 extends further in early US session and reaches as low as 102.61 so far. As discussed before, An intraday top might be in place with 4 hours MACD staying below signal line. Intraday outlook remains neutral for the moment. Below 101.49 minor support will turn intraday bias back to the downside. Further break of 98.55 support will confirm that corrective rebound from 95.77 has completed and will bring retest of this low. On the upside, decisive break of 103.59 resistance zone is needed to indicate underlying upside momentum is still strong. Otherwise, outlook will still remain neutral in case of mild rally.

In the bigger picture, as discussed before, focus is still on 103.59 cluster resistance (61.8% retracement of 108.59 to 95.77 at 103.69). As long as this resistance holds, there is no confirmation of a medium term bottom yet. USD/JPY has just broken out of multi-year triangle consolidation pattern that started in 98 at 147.68. The structure of the current fall from 124.13 argues that USD/JPY is still in the middle of a larger down trend only. Sustained trading below 95.78 will encourage further fall to next important psychological level at 90 first.

However, firm break of 103.59 cluster resistance will argue that a medium term bottom is already in place after meeting 76.4% retracement of 79.75 to 147.68 at 95.78. In such case, stronger medium term rebound should be seen to correct the whole fall from 124.13, targeting 108.59 resistance first.