US unemployment claims dropped to 388k. This impressive figure provides a nice ending to the year and hopes for 2011, but fails to impress the thin markets, that are acting strangely throughout the week, as expected in times of low volume.
Not only is this far better than expected, it’s also the lowest level since July 2008, and also below the psychological level of 400K. Unemployment claims have been ranging between 430 to 500K during most of 2010, and in recent months we saw steady drops in the weekly figures and eventually steady drops in the 4-week moving average.
This fall is far from steady, so we need to wait and see if it’s a one time event or another round of improvement in the US economy. This adds to the notion that the recent Non-Farm Payrolls was wrong, and the upcoming figure, that will be released on January 7th, will be positive, a good ending for a bad 2010.
Unemployment has been the main theme in 2010 – the main driver of QE2. This might help reduce the scale of dollar printing – pushing the dollar higher.
The reaction in forex isn’t as expected – EUR/USD continued uphill after the announcement, rising above the minor resistance line of 1.3267. Other pairs had a mixed reaction.
See more technical levels for the Euro in the Euro/Dollar forecast.
Update 14:45 GMT: Chicago PMI also exceeded expectations and scored 68.6 points, far better than a drop to 61.2 that was expected. This is another great sign that the US economy is picking up.
Update 15:00 GMT: Last chunk of data out, and it’s also positive – US Pending Home Sales also exceeded expectations with a rise of 3.5%, double the expected rise of 1.8% that was expected.
Perhaps the markets are awaiting for the chunk of data to end before a full reaction is made, and last minute positioned rocks currencies.Get the 5 most predictable currency pairs