Forex Weekly Outlook – October 4-8

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A very busy week expects forex traders, with rate decisions in the UK, Europe, Japan and Australia, and many employment figures. The American Non-Farm Payrolls, closes the week in the monthly circus.

The theme in the past week continued to be a weaker dollar. Not all currencies enjoyed this equally – the Aussie and the Euro are the big winners, while the British Pound and the loonie are only enjoying small gains. This week, it’ll be around the NFP. Let’s start:

  1. US Pending Home Sales: Monday, 14:00. The amount of homes that are still waiting the final closure of a deal recovered last month with a 5.2% after terrible months beforehand. This housing sector figure will probably continue recovering, with a more modest rise this time – 2.6%.
  2. Japanese rate decision: Tuesday morning. After the big intervention in the yen, Japanese policymakers meet again to discuss the state of the export-oriented economy, that is still suffering from the strong currency. No change in the rates is expected. The focus will be on any comments about further interventions – comments directed to forex.
  3. Australian rate decision: Tuesday, 3:30. After 4 pauses in rate hikes, there are some expectations that the RBA will resume rate hikes once again, especially as employment is strong. On the other hand, there’s still a lot of uncertainty about the situation in the US and the value of the China’s yuan – Australia’s main trade partner. Any result will rock the Aussie. It’s also important to watch the accompanying statement for hints about future policy.
  4. US ISM Non-Manufacturing PMI: Tuesday, 14:00. Last month, the purchasing managers’ index for the services sector was released after the Non-Farm Payrolls. This time, we’ll get an early indication. Last month’s figure disappointed with a drop from 54.3 to 51.5 points, still above the critical 50 point mark, still indicating economic expansion. We’ll probably see a a slightly better number now – 52.2 points. A drop under 50 will be bad for the dollar.
  5. US ADP Non-Farm Employment Change: Wednesday, 12:15. This report totally missed on the result of the Non-Farm Payrolls – it showed a drop in private sector jobs while the actual number in the NFP was positive for this sector. Nevertheless, the publication always triggers lots of action in currency markets. After a drop of 10K last month, a nice rise is expected now – 22K.
  6. Australian Employment data: Thursday, 00:30. After one month of mixed results, Australia returned to post excellent job figures – a gain of over 30K jobs, and a drop in the unemployment rate to 5.1%. This time, a smaller gain is expected in the employment change figure, 20K, and the unemployment rate will probably remain unchanged.
  7. British rate decision: Thursday, 11:00. British inflation refuses to slide back into the 1-3% target, and there’s still one member of the MPC, Andrew Sentance, that pledges a rate hike. The other members aren’t convinced, and even talk about more pound printing, so the rate will probably remain unchanged at 0.50%. The focus will be on the accompanying statement – will it be optimistic or pessimistic regarding the recovery?
  8. European rate decision: Thursday, 11:45. The president of the ECB sees inflation gradually rising in the Euro-zone, but unemployment is still high. The gap between the different European countries is widening. The result will probably be another month of an unchanged rate at 1%. Any comment about the state of the economies and especially about the debt issues, now in Ireland, will move the markets.
  9. US Unemployment Claims: Thursday, 12:30. The last job-related indicator before the Non-Farm Payrolls is unlikely to supply a real clue – this weekly indicator moves in quite a narrow range for quite some time. A rise above 500K will be dollar negative, while a dive under 430K will be positive. An unchanged number of 453K is predicted now.
  10. Canadian employment data: Friday, 11:00. Canada enjoyed an nice gain in jobs last month, 35K, but the unemployment rate ticked up once  again to 8.1%, showing that the recovery is still slow. A much smaller gain in jobs will probably be seen now, 11K, and the unemployment rate is likely to tick back down to 8%.
  11. US Non-Farm Payrolls: Friday, 12:30. The king of forex was finally better than expected last month – a loss of only 54,000 exceeded expectations and showed that the situation isn’t as devastating as earlier thought. This release is the final release that consists of an impact from the decennial census. The number of people employed by the census dropped from 83K to around 9K. So, this is the last time that the private sector payrolls will be of high importance. The unemployment rate will probably remain around the same levels and will continue to have a smaller impact. Headline NFP is expected to remain almost unchanged with a minor gain of 3K, while the unemployment rate is likely to rise to 9.7%.

That’s it for the major events this week. Stay tuned for coverages on specific currencies.

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

3 Comments

  1. Matthew Censullo on

    I also think Bernake speaking today will have some impact…..Here is a repost of some of the key takeaways from his 60 minutes interview:

    – US recession likely to end this year and recovery to begin in 2010; interest rates will rise with economic recovery
    – US averted an economic depression
    – Hard to forecast if unemployment will rise to double-digits
    – Largest risk is absence of political will to relieve crisis
    – All large US banks are solvent and will not fail; Says the way to restore confidence in financial markets is to show progress; Sees improvement in banks after Fed efforts
    – “First sign of recovery is large bank’s ability to raise private equity”
    – Not fair for taxpayers to bail out AIG, but there is no choice in order to stabilize the system
    – Lehman failure proves govts cannot let large financial institutions go under mid-crisis, deteriorating economy has made further financial bailouts necessary
    – Tighter regulation and a regulatory body for winding down large firms is needed
    – Says the biggest lesson of the Great Depression was that the Fed let banks fails and sharply contracted money supply, turning a recession into a much more pronounced downturn
    – Says this is an “extraordinary time” when asked why he agreed to do an uncharacteristic for Fed chair interview with the press; Wants to reach out to Americans because “what happens on Wall St. extends to Main St.”

  2. Thx for that Bernanke summary. In first point you mean 2011 I think.