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U.S. Trade and Jobless Data to Provide Only a Temporary Boost

Last updated 4/9/2009 9:06 AM ET (GMT -5) 0 Comments - Add your comment

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Kathy Lien

Director of Currency Research, GFT

In the month of February the U.S. trade deficit fell 28 percent to -$26.0 billion, the smallest level in close to 10 years. The last time the trade deficit was smaller than current levels was back in November 1999. In a strong economy, a smaller trade deficit is positive but in the current market environment, a shrinking trade represents weakness and not strength.  However the U.S. dollar has rallied against the Japanese Yen on the heels of the report as the details reveal the first increase in imports since June 2008.  Although it is far to early to scream for a recovery in exports, the positive number still provides a bit of relief.  Imports continue to be the primary reason why the trade deficit is shrinking as the recession cuts back U.S. demand for foreign goods.  As the deficit closes in on zero, traders will start to wonder whether the U.S. could turn a trade surplus, which something that hasn't happened in more than 17 years.  We do not rule out this possible but will also be more worried than pleased that it has happened.

Source: FX360.com

Continuing Claims Hit Record Highs

A decline in jobless claims and a rise in import prices also contributed to the dollar's rally.  Claims fell from an upwardly revised 674k to 654k while import prices rose 0.5 percent.  The improvement in claims suggests that the bleeding may have stopped for the time being but it is still very concerning that continuing claims have hit a record high of 5.84 million. With such a staggering amount of Americans out of work and yesterday's FOMC minutes forecasting even more layoffs, there is no question that any recovery in the U.S. economy will be a slow and gradual one as companies will have to first work off their excesses before hiring once again.   Overall this morning's U.S. economic reports provide a glimmer of hope, but in no way shape or form does it change our belief that we are still in a bear market rally.  

 Breaking Down Jobless Claims With Steve Forbes

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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.