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January 12th, 2014 at 8:23 am

Mysterious Unemployment Rate.

Strange ways of calculating the Unemployment Rate were once again exposed on Friday. According to government figures, the unemployment in the USA now stands at 6.7%, which represents vast improvement of 0.3% in one month. Unfortunately, the NFP report, released at the same time, showed only 74K new jobs created during this period. This number was significantly below the projection of 196K. Apparently, about 347K people stopped looking for work and are no longer counted as unemployed, hence the good news. It is difficult to understand just what happened to these people (retirement, welfare, moved abroad, etc.), but for the purposes of bureaucracy, they are no longer part of the work force. Incidentally, by this kind of accounting, the participation level fell to 62.8%, the lowest level in 36 years. This means that almost 40% of working age Americans are not working and not interested in getting a job.

As it is often the case when release does not meet expectations, volatility spiked across financial markets, including currencies. In short, the USD was a big loser, not really setting the tone for 2014, which was supposed to be the “year of the Dollar”. Of course, that can change, but if we have more confusing data going forward, big price swings are very likely. That goes for other crosses, too, which were active on Friday, with some of them moving significantly more than recent average daily ranges.

AUD-CAD 01-10

The AUD-CAD, for example had a huge day, gaining about 200 pips. Few days ago, I discussed a trade in this pair, with entry at 0.9585. My objective was 100 pips, but seeing strong rally under way, I held out a little longer, for 127 pips. It rallied another 100 pips or so before closing. No complaints, though, the trade worked out as planned, with a small bonus. BTW, another position covered in the same post, the GBP-JPY short, remains open.

GBP-USD 01-10
A little earlier in the day, I looked for short-term breakouts at the start of the London session. The GBP-USD was promising, having formed a fairly tight range. Nice move to the down side developed, producing quick 30 pips and allowing for exit way before the NFP report.

AUD-CHF 01-12

Among other things, I am interested in seeing if the Australian Dollar continues its ascend. In relation to the Swiss Dollar, the Aussie has already rebounded and is currently building a base, visible on the 4H chart. For the rally to continue, the price must move above the high of about 0.8140 and I have a buy order at 0.8147. If it moves this way, 100 pips objective should be reasonable. Have a great trading week!

Mike K.

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