It has been a theme for some time now, that employment numbers are taken very seriously by currency markets. Response is strong to any number that is outside of estimates. I’ve mentioned it before on these pages, and yesterday, or very early today, depends on where you live, was no exception. The 4th quarter unemployment rate in New Zealand jumped unexpectedly to 7.3%, exceeding the consensus of 6.8%. Markets took it a surprise and NZD fell. Dropped like rock is more descriptive. Very strong move giving ground to all other currencies, much like the AUD slide couple of days ago. That one, of course, was created by rate decision.
One should remember this going into tomorrow. In US January NFP numbers will be released, always an important announcement. In current environment even more so. Any surprise could cause large moves in US pairs, and probably spill over to JPY crosses. To make things more interesting, Canadian employment numbers are scheduled to published tomorrow, too. All this could make for a an explosive day in forex trading.
What happened in Kiwi trades was pretty impressive, if you happened to be on the right side of the move. I had one trade at the time, and no, I didn’t posses any foresight into what was about to happen. Had I known, all NZD pairs would have been shorted. EUR-NZD started to show some signs of reversal, much like EUR-AUD and I placed a buy order at 1.9690, with 120 pips objective, fully expecting to sit on it for a few days.
Not much really to comment on. Move was fast and decisive, meeting my target in a short order. Wish trades went like this one all the time. By perhaps next ones will. BTW, earlier on I was suggesting possible buys in NZD-CAD and NZD-JPY. Neither one was initiated and they are now cancelled. Sentiment for the Kiwi has turned bearish, so those set ups are no longer valid. As a matter of fact it is breaking through earlier supports on intermediate time frame.
Similar situation is happening in other JPY pairs right now. Some of them will probably bounce, as these moves are a little overextended for one day. Problem is, you never know for sure, so some risks have to be taken. I’m watching hourly charts for minor lows and will try to sell them on next move. In this situation selling on corrective run ups will lower risks and could a good idea.
My everlasting trade in AUD-CHF is still live. Arguably it looks much better today than the last time I posted it here. Australian Dollar is also falling and hopefully will continue this course for some time, long enough to register solid gains. Same for EUR-AUD. BTW, both European Central Bank and the Bank of England held their respective monetary policy meetings today. No surprises, interest rates are left unchanged by both of them. Tomorrow employment numbers, which could cause even more volatility to close the week.
Mike K.
Hi Mike,
Always a lot of food for thought in this website.
I was wondering if you are still watching the latest development on the GBP/CAD cross, it retraced a bit last week and now is starting show some buyers coming. Do you still have your GBP/CAD buy order open?
Thanks and keep on the good work.
Mario
Great article, lots of intersting things to digest. Very informative
Hi Mario,
Thank you for your kind comment. Yes, the GBP-CAD order is still valid. For now at least. Buy level is still correct, in my opinion. Unfortunately CAD is not acting as weak as NZD and AUD, but if the that trend continues, I’d expect it to catch up. However, after Thursday fast action it is hard to expect more of the same on Friday. Wild card is Canadian employment report. If it is better than expected, CAD could get a boost and selling GBP-CAD at 1.6800 could be approtriate. For me, I’m just looking for the buy, Should the price move the other way, I’ll wait untill my views line up with what the market is doing and try again.
Mike, are you still in aud/chf position or did you manage to get out before this latest run up?
No, Hether, it was closed during the sell off, together with NZD-JPY. I’ll post details in next update.
And, BTW, I was also stopped out on CAD-CHF.
[…] 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 […]
[…] by about 52,000 positions, which is much more than the estimate. Once again market was very responsive to employment figures, a pattern of late, and Aussie rallied. This rise was pretty good, with most of it happening within an hour of the […]