After explosive moves on Thursday, things slowed down on Friday only to settled down even more today. It reminds of the seas whipped up by a storm, with waves getting smaller and smaller over time as the winds dissipate. Eventually new wind picks up and waves start to get bigger and bigger again. Currently markets appear to be in this calm before the storm mode, waiting for financial winds, like news, to start moving them again. We know it is going to happen, perhaps as early as tomorrow, maybe a little later. It is just a matter of time before this consolidation is over.

Opening was docile for most currencies, with very few gaps. Yen was really quiet and British Pound turned out to be most active at that time. Not a typical development, but hardly unusual. After all, it is highly volatile currency and prone to large moves. Crosses with commodity currencies produced gaps, but only one was large enough to trade it, GBP-CAD. The other ones simply didn’t offer good entry points or/and objectives.

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Finance ministers and central bankers are meeting in Iqaluit, Canada, for a G-7 meeting. High on the agenda are currency exchange rates, although the session appears to be academic in style, rather than policy setting. Report on the subject was prepared by  Canada’s Finance Ministry and covers inflexibility of currencies of “some Asian countries” (read China). Apparently Chinese officials realize a more flexible exchange rate is in their economy’s best interest, and indicated such a shift is “likely.” Yeah, right. We have heard it for a long time now.

Report blames US trade deficit and the account surplus in Asian countries for widening current recession. This type of major imbalances must be avoided in order to return to sustainable growth. Interestingly enough, pegged Yuan or oversized foreign reserves of China were not the original cause behind the financial meltdown of 2008. The biggest single culprit was the out of control US consumer spending, fueled by low interest rates and reckless lending (and borrowing). It seems that all that was made easier by ever increasing purchases of US debt by China and other countries, which helped to keep interest rates at low levels for extended period of time. Of course, had they not done that, the cost of financing American debt would have been very high, pushing rates up across the board and slowing economic expansion. Seems no matter what, there is always an evil lurking somewhere. Only which is the lesser one?

It doesn’t look like this G-7 meeting will produce anything with enough power to move the markets, so chart analysis takes front stage. Following explosive moves on Thursday, everything settled down a little bit on Friday with very few clues for next moves. Hard to say right now if the trends will resume after the open, or some corrections are more likely. Hourly chart of AUD-JPY is a good example.

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Yesterday NFP report was released. It was much anticipated by economists and traders alike. And it delivered, only not what one would expected. This was a single most convoluted piece of fundamental news I ever came across. One hand non-farm payrolls declined by 20,000 positions, meaning that employers are still eliminating jobs. At the same time, official unemployment rate declined by rather large 0.7%, falling from 10% to 9.3%. To make it even more interesting, initial claims for unemployment benefits, which was reported a day before, were up, meaning more people applied for them. So, jobs are still crossed off the books, more people get benefits yet official unemployment rate is dropping dramatically. A miracle! Or creative accounting?

To be sure, an explanation to this aberration surfaced, but it was just as eyebrow raising as logic behind the great announcement. Seemingly November numbers contained major error and had to be revised by 60,000. But even this doesn’t add up. If 60,000 equals about the 0.7% improvement, this would mean that total number of unemployed is only about 1 million and we know it is much higher. None of this makes any sense. Either there is some kind of political consideration in making statistics looking better, or people compiling them are incompetent. After all, not that long ago GDP numbers were revised as well, casting a deep shadow of doubt on accuracy and integrity of these figures.

And let’s make it clear that this is important report. I don’t mean just for a handfull of speculators who purchased some half-ass e-book “Trade your way to riches with NFP reports”. These numbers influence policy making, job creation incentives and scores of other issues which eventually effect everybody to some degree. One would hope, no, not hope, expect, that something of this magnitude would be at least clear enough so as not to contradict itself. If anybody makes any sense out of it please let me know.

There was no update yesterday, because I was busy trading. Normally Friday is my short day, I like to start the weekend early. This time around I had many trades trying to play continuation moves after explosive Thursday. As soon as Employment news rule post was published, all currencies went into turbo charged mode. Almost all of the trades discussed earlier this week were closed within an hour or a little more. Turned out to be quite a day.

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