USD/JPY Knocks Out 100 Ahead of NFP

Last updated 4/3/2009 5:42 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Top Stories

• Yen takes out 100 on stop fueled run in Asia
• UK PMI Services improves markedly but still below 50
• Equities mixed ahead of NFP
• Oil near $52/bbl
• Gold at $910/oz.

Overnight Eco

• AUD AIG Services Index 35.2 better than 32.2 last
• EUR German Import Prices -0.1% vs. -0.3%
• CHF CPI -0.3% vs. 0.0%
• EUR Final Services PMI 40.9 vs.40.1
• GBP Services PMI 45.5

Event Risk on Tap

• USD Non-Farm Employment Change expected at -656K
• USD Unemployment Rate expected at 8.5%
• USD Average Hourly Earnings expected at 0.2%
• USD ISM Non-Manufacturing PMI expected at 41.9

Price Action

• USD/JPY takes out 100 on option related buying
• AUD/USD helped to 7200 on risk appetite flows
• GBP/USD rusn through 1.4800 on better PMI Serivecs data
• EUR/USD capped at 1.3450 most of the night with focus elsewhere

USD/JPY took out the key 100 level mark on a stop fueled rally in Asian session while cable ran through the 1.4800 figure in a lively pre-NFP action as currency markets prepared to end a volatile week of trade. In Asia very aggressive buying from option related accounts knocked out the 100 barrier in the pair backed by continuation of risk appetite in the afterglow of the successful G-20 summit.

After profit taking took the USD/JPY down to 99.50 the pair recaptured the 100 level once again in morning European trade ahead of the NFP release. The NFP of course remains the key event risk for the pair and should the unemployment data print worse than expected USD/JPY could quickly recede from these levels on risk aversion flows. However, if the number proves to be a non-event and US equities rally into the week-end, momentum could easily carry the pair to the 101 level before it runs out of steam.

In UK the PMI Services report scored a trifecta of good news for the UK economy becoming the third such data point this week to beat expectations. As we noted earlier, “UK PMI Services report improved markedly rising to 45.6 versus 43.2 the period prior and 43.6 consensus call. The upside surprise in the PMI Services report caps a good week for UK economic data with PMI Manufacturing and PMI Construction releases improving as well. The news provides the strongest evidence to date that the contraction in UK economic activity may have finally leveled off, although all three gauges remain below the key 50 boom/bust line.”

In North America today the focus will of course rest with the NFP data from the US. Given the poor reading from the ADP report and yesterday’s weekly jobless claims, the market appears to be well prepared for -700K print and is therefore unlikely to react severely to any number close to that parameter. Only a truly shocking reading of -800K or worse could shake up the equity and currency markets with risk aversion once again making a comeback. The labor data no doubt continues to be horrid, but as many analysts have pointed out it’ is a lagging indicator. With market looking forward to a possible rebound in global demand, the NFP numbers simply need to stabilize in order for investor enthusiasm to maintain its present levels.

Dollar Topped Out?

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.