Friday turned out to be big on employment news. The Non-Farm payroll report was released in the US. No doubt, it was the most anticipated event on the calendar this week, especially considering that all other employment news recently have been surprising. On the negative side, no less. Of particular interest was the correlation between the NFP and the unexpected spike in unemployment claims the day before. At stake is the answer to the question of recovery – is it for real or only a mirage?

Today’s NFP turned out to be yet another surprise, once a gain a negative one. It showed the US economy lost more jobs than expected in July. Non-farm payrolls dropped by 131K. While the private sector employment rose by 71K, it was not enough to offset the sharp drop in government employment related to the census workers, who were let go. By comparison, the pre-report consensus had called for 60K fall. Perhaps even more troubling was the revision of numbers for June. That data was corrected,  lower, of course.  Updated version has payrolls in that month falling by 221K rather than the 125K previously reported. June private sector jobs were also revised much lower, to +31K from +83K previously.

The currencies responded immediately and sharply, with the US Dollar falling against most of the other majors. The Loonie was the exception, but more about it later.  Some other currencies were also very active, in particular the Yen and all its crosses, which was of particular interest to me.

As described in the previous post, numerous buy and sell levels were considered in AUD-JPY. First move came soon after the last updated was published, with a move above 78.70, where long entry took place. This move didn’t go far, failed to reach the objective of 79.20 and the trade went nowhere. Due to the high level of anxiety surrounding the NFP, it was closed at the top of the hour before the data release. As it was mentioned here many times before, I normally don’t trade these events. The AUD-JPY dropped sharply, falling through my intended sell level, but since that happened on the news, I took no action. There was no real trend developing, prices of most JPY pairs gyrated wildly. In other word, a mess. Same thing with the Beast, the other pair covered yesterday – the sell level was hit on the news, so no trade. But I will return to these crosses next week.

The NFP report was not the only employment announcement today. About an hour before, Canadian employment numbers were released. For the month of July analysts expected a gain of 10.3K jobs. Unfortunately, they were wrong again and the actual result was a loss of 9.3K jobs. The Canadian Dollar was punished on the news, even if the immediate response was relatively slow. However, during the hour after that, this trend accelerated, extending CAD loses. On the EUR-CAD chart this was the enlarged candle. At this point market direction look stable- directional move, candle closed almost at the extreme high and the previous high was taken out. Good breakout conditions. Since I had been following CAD pairs this week, looking for trades in this direction, it was a buy situation. Trade of the day, which brought 73 pips. Regrettably, it was the only trade including the Loonie. Well, more to come next week.

Mike K.