German Employment Data Better than Guess

It seems we’ve hit that point in the economiccycle where traders celebrate the quality of the analyst guess. We saw it lastweek when U.S. GDP fell to 1.6% but stocks rallied initially because thepre-report guess was 1.3%.

It seems we’ve hit that point in the economic cycle wheretraders celebrate the quality of the analyst guess. We saw it last week whenU.S. GDP fell to 1.6% but stocks rallied initially because the pre-report guesswas 1.3%. This morning the Euro is rallying because Germany’s federal labor office saidthe seasonally adjusted number of unemployed workers fell by 17,000 in August.Economists had forecast a decrease of 20,000 in the number of people withoutjobs.

I suppose you can build a case for calling this report asteady improvement in the labor market which suggests that the German economyis improving but at a slower pace.

Actually when a market rallies because the report was betterthan the pre-report estimate, it doesn’t necessarily always mean new buyerscame in. Many times investors are merely adjusting their positions triggering ashort-covering rally. To professional traders it’s not always about being rightor wrong about the market as much as it is having the right size on in order tomanage the risk.

On the better than expected news this morning the EUR USDrallied, triggering a short-covering rally in front of the previous main bottomat 1.2587. Last night’s sell-off created a swing top at 1.2779, helping to forma minor range of 1.2587 to 1.2779. The main trend will turn to up on a tradethrough 1.2779. The downtrend will resume on a trade through 1.2587.

In the bigger picture, the main range is 1.1876 to 1.3334.This range has created a major retracement zone at 1.2605 to 1.2433. The chartsindicate that a failure to hold the 50% level at 1.2605 should trigger a breakto the .618 retracement price at 1.2433. An uptrending Gann angle at 1.2486could slow down the rate of the descent should this market find sellingpressure.

It’s a little premature to talk about the long-side of theEuro if you are a trend-trader until 1.2779 is taken out. If this occurs thenthe first upside target will be 1.2961 to 1.3049. Counter-trend traders mayhave stepped into the long-side this morning. The general rule forcounter-trend traders is “find an exit first before entering”, and based onthis morning’s activity, this exit may have been identified as 1.2587.

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

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