Employment Worries Pressure U.S. Equities

The U.S. Dollar traded higher against most major currencieson Monday. The falling stock market contributed to the selling pressure in thehigher-yielding currencies while a move to weaken the Japanese Yen triggeredthe opposite reaction by traders.

The U.S. Dollar traded higher against most major currencieson Monday. The falling stock market contributed to the selling pressure in thehigher-yielding currencies while a move to weaken the Japanese Yen triggeredthe opposite reaction by traders.

U.S.stocks extended losses throughout the session after the release of U.S.income and consumption data showed meager advances in income and consumerspending. Increased M & A activity and a stock buyback by HP also failed togenerate any interest in the long side of the market.

Some traders believe that Friday’s U.S. Employment report isthe problem. Investors may be staying on the sidelines worried about it. Thismonth’s jobs report has taken on added importance following a summer of weakhousing and consumer data. What it is basically coming down to is the thoughtthat if there are no jobs, there will be no recovery.

The EUR USD felt pressure after failing to rally following atest of a 50% level at 1.2754. The key area to watch is 1.2605 to 1.2687. Abreak through this zone will reaffirm the downtrend and likely trigger anacceleration to the Fibonacci retracement level at 1.2433.

The European Central Bank will make its latest interest ratedecision on Sept. 2. It is expected to say the same thing the Federal Reservehas been saying, expect more economic uncertainty and that the road to economicrecovery will remain bumping.

The GBP USD is trading lower and in the middle of nowhere onthe daily chart. It’s hard to describe what traders are trying to do based onthe current chart pattern. What is clear, however, is that a break through therecent low at 1.5371 is likely to trigger a break all the way down to the major50% price level at 1.5113.

The biggest concern among British Pound investors at thistime is whether the economy can withstand the jolt from new taxes and financialausterity measures.

The big news story today involved the Japanese Yen. Early inthe trading session, the Bank of Japan announced that it would expand itscurrent 20 trillion Yen quantitative easing program to six months from itscurrent three-month time frame. At the same time it increased the amount offunds available by 10 trillion Yen.

The BoJ expected this action to weaken the Yen instead itwas the USD JPY that traded sharply lower. Traders reacted as if they hadexpected the move or were waiting for something more intense.

Last night the Dollar/Yen stopped just short of turning themain trend on the daily chart to up with a move through 85.91. The subsequentbreak identifies the significance of this price level

Falling demand for higher risk assets pressured thecommodity and risk-linked Canadian Dollar and Australian Dollar. Both marketsresumed their downtrends after three day short-covering rallies.

The rally in the Australian Dollar ended inside of ashort-term retracement zone at .8995 to .9049. If equities continue to weaken,then look for the start of a correction to .8644.

Thin trading conditions can lead to excessive volatilitythis week. U.S.employment will be the catalyst this week, starting with Wednesday’s ADPEmployment Change, followed by Thursday’s Weekly Initial Claims. Finally, onFriday, the U.S.reports Non-Farm Payrolls and the unemployment rate. Preliminary guesses arefor NFP to show a loss of 106K to 120K jobs. The unemployment rate is expectedto come in at 9.6%.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

Disclainer: