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February 2nd, 2013 at 5:01 am

Employment Data Unclear yet Again.

Much as it happened during the past few months, employment numbers released on Friday were a little confusing. The NFP report showed that 157 K new jobs were created in January, following the increase of 196 K (revised upwards) in December. Interestingly enough, in spite of this seemingly positive development, the Unemployment Rate jumped higher as well. It now stands at 7.9%, worse than the forecast of 7.8% and above the previous month’s reading of 7.8%. Something does not add up, same as during late 2012, when the Unemployment Rate was declining in a curious manner.

If this data is somewhat dubious, why do the markets assign such high importance to it? Under most conditions, employment numbers indicate health of the economy and strongly influence decisions shaping financial policies. Currently, they carry even more weight, after the FED specifically tied its interest rate policy to the unemployment level. Historically low interest rates could remain in effect until the unemployment drops under 6.5% and/or inflation exceeds 2.5%. Market participants are trying to determine how soon the central bank might start the tightening cycle and position themselves accordingly. Of course, the way this data is compiled, by household survey, the magic number of 6.5% could magically show up next month. Just kidding.

Trying to avoid the key fundamental events, I focused on short-term trading, looking for breakouts from London pre-open ranges. The commodity currencies were not suitable, having jumped on Chinese PMI numbers. In my mind, the best candidates were the GBP-USD and the USD-CHF. While a little shaky, the trade in the Cable worked out as planned, fully realizing the objective of 30 pips.

Tying up some loose ends from last week… All of my ideas featured on these are concluded, admittedly with mixed results. On balance, though, results were positive, making for a decent period. The only unfinished piece of business is the intended short position in the NZD-JPY. My order at 74.98 stayed unfilled, due to another massive selloff in the Yen. From now on, I will track this pair, and few other JPY crosses, with sell orders under the latest lows on their respective hourly charts. More details later. Have a great weekend!

Mike K.

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  • Latest NFP report
    5:45 am on April 20th, 2013 1

    [...] in effect until the unemployment drops under 6.5% and/or inflation exceeds 2.5%. source: Quotes and [...]


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