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Non Farm Payrolls were in line with the official expectations – a fall of 651K jobs, but the affects on the forex market were fascinating, and can teach us some things for the next release. Let’s walk through the market alleys and find some precious currency correlations:

Official expectations were a drop of 647,000 jobs in the US, worse than last month’s disappointing fall of 598,000 jobs. Economists and commentators that analyzed the data this week were “whispering” that the final release could be worse, even above 700K!

Well, in the end, Non Farm Payrolls were very close to the official expectations, at 651K. The Unemployment Rate, published at the same time, was worse than expectations: 8.1% instead of 7.9%. In previous posts this week, I stated that a rate above 8% won’t be a big surprise, since this figure disappointed month after month.

High Tension and Volatility before the release

I’ll examine the Euro and the Yen, since the Pound and the Swissy have a similar behavior in these events.

In the early hours of the Asian session, the market was calm. But at 6:00 AM GMT, the dollar began falling: USD/JPY fell from 98.20 to 97.30 during the course of an hour. At the same time, the EUR/USD moved from 1.2570 to 1.2720.

The USD/JPY continued to fall, reaching a low of 96.60 at 10:00 AM GMT. EUR/USD also moved slower, but in the opposite direction, in favor of the dollar.

Going closer to the release, the dollar regained some strength against the Euro and against the Yen. In the half hour before the release, the Japanese Yen made strong moves, shaking between 96.65 to 97.30. The Euro remained tense.

NFP Release splits currencies

At 13:30, the release was made. EUR/USD jumped by 70 pips immediately after the release and stayed rather high (though shaky) for an hour and a half.

Contrary to the Euro, the Yen suffered against the dollar. USD/JPY initially jumped 100 pips and continued to rise for another hour and a half., reaching 98.10.

So, the Euro gained and the Yen lost ground – time to cross! EUR/JPY jumped by 250 pips during half an hour, from 122.30 to 124.80.

Afterwards, the market calmed down near the end of the forex week.

Dollar Yen Currency Correlation. Again

What we can learn from this is that there is still is a strong currency correlation between the dollar and the Yen. When the dollar weakens agains the European currencies, the Yen weakens even more.  

I’ve written about in the past, and February 2009’s NFP was a very strong example, of how a major market mover, such as NFP, sends the Yen crosses to very sharp moves.

At these high tension events, the Yen crosses seem very attractive.

I’ll check this strengthening theory in the upcoming major releases in the Forex market.

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