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Sharp Rise in Jobless Claims Sinks Dollar

Last updated 2/25/2010 8:52 AM ET (GMT -5) 6 Comments

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Kathy Lien

Director of Currency Research, GFT

The U.S. dollar traded sharply lower against the Japanese Yen following much weaker than expected U.S. economic reports.  Although durable goods orders rose 3.0 percent, if you take away the big contribution from non-defense (think Boeing) aircraft orders, durable goods fell 0.6 percent, the biggest decline since August 2009.  Yet what really triggered dollar bulls to sell were the jobless claims figures. First time claims jumped for the second week in a row to 496k from 474k, the highest level since November.  Two weeks of sharply higher jobless claims raise red flags for the labor market especially since economists expected claims to drop.  Continuing claims also rose from 4.61M to 4.617M.

In yesterday's semi-annual testimony on monetary policy, Fed Chairman Ben Bernanke expressed concern about the labor market and the latest jobless claims report now validates this concern and leads currency traders to wonder if job losses will accelerate.  Non-farm payrolls are due for release next week and based solely upon claims, we may be looking at yet another month of negative job growth.

Bernanke is taking the stand for the second day and unfortunately the second act won't be as interesting as the first one.  Bernanke will be delivering the exact same testimony to the Senate.  The questions will be different but his tone will not.  Bernanke's lack of optimism has continued to weigh on the currency markets but traders are also worried about Greece and the possibility of another downgrade by rating agencies which explains the weakness in the euro.  S&P warned of a 2 notch downgrade in a month if Greece does not get their act together.  Greece turned over their swap information to the Eurostat on Tuesday and chances are that rating agencies are not comfortable with what they learned. 

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Comments (6)

alexjbrandt

February 25, 2010 at 09:25 AM ET

The commodity currencies are getting hit pretty hard, with the dollar strengthening against AUD, NZD and CAD.

klien

February 25, 2010 at 09:32 AM ET

Another day of risk aversion my friend! Stocks down big time

alexjbrandt

February 25, 2010 at 10:00 AM ET

Yeah, thats for sure! I was hoping that aud/usd would rally back to .93 :( Just earlier this week it seemed like it was possible when it was at .9080. Oh well, another day.

FXDragon

February 25, 2010 at 10:09 AM ET

I've always felt remorse of some sort during short selling. I guess im a responsible trader;)
I wish there was confession in the church of FX because im starting to develop SSS (short selling syndrome)

Why is usd data not published still?

Silenus

February 25, 2010 at 10:38 AM ET

Uh... Never mind.

Semaj

February 25, 2010 at 10:34 AM ET

How do the good earnings reports this week look to effect upcoming risk. Jobless claims report = 3rd verse same as the 1st, possible headfake here? Grossly overextended moves in multiple markets. Big bearish 1 hr candle on the dollar index. Let's see what the 4 hr candle update yields, building bearish currently. Dow/S&P for the rest of today?? Buckle up :)

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.