Economic Insights
Upbeat U.S. labor data sends Dollar higher
Last Friday, The U.S. Labor Statistics Department announced that American employers took on more workers than forecasted in April. Payrolls expanded by 165,000, following a revised 138,000 increase in March that was larger than first estimated. Revisions added a total of 114,000 jobs to the counts for February and March.
Interestingly, the jobless rate unexpectedly fell to a four-year low of 7.5%, reflecting confidence in the outlook for the world’s biggest economy. The jobless rate dropped from 7.6% in March, indicating that most of the 210,000 new entrants to the labor force found employment. The rate, derived from a separate poll of households, was forecast to be unchanged according to the Bloomberg survey median. The employment report also showed that average hourly earnings rose 1.9% from a year earlier to USD23.87.
Immediately after the announcement, the USD rallied, sending the USDJPY up over a hundred pips in one hour and touching a weekly high of 99.26. Stocks also rallied, sending the Dow Jones Industrial Average briefly above 15,000 for the first time, as the report bolstered expectations that the almost four-year economic expansion will overcome a second-quarter slowdown.
In Europe, the European Central Bank (ECB) cut the main refinancing rate by 25 basis points to a historic low of 0.5%, a move predicted by 45 of 70 economists in a Bloomberg News survey. The ECB left its deposit rate at zero and reduced its marginal lending rate to 1% from 1.5%. “Our monetary policy stance will remain accommodative for as long as needed,” ECB President Mario Draghi said at a press conference after the rate cut. He stated, “We are closely monitoring money market conditions and their potential impact on our monetary policy stance and its transmission to the economy.”
Asian currencies trended higher on the backs of news from the U.S. and Europe. The Morgan Stanley Capital International (MSCI) Asia Pacific, excluding the Japan Index, added 0.5% on Monday morning in Hong Kong. The South Korean Won strengthened 0.3% against the Dollar while India’s Rupee touched a two-month high.
Key economic releases
1) Australia: Cash Rate. Tuesday, 7 May, 12:30pm
I expect figures to remain at 3.0%.
1) Australia: Cash Rate. Tuesday, 7 May, 12:30pm
I expect figures to remain at 3.0%.
2) New Zealand: Unemployment Rate. Thursday, 9 May, 6.45am
I expect figures to come in at 6.8% (previous figure was 6.9%).
I expect figures to come in at 6.8% (previous figure was 6.9%).
Currency Insights
GBPUSD – support at 1.5525
On the hourly chart, the GBPUSD moves in a strong uptrend, clearing over 40 pips from 23 April to touch a high of 1.5606 on 1 May. With the upcoming announcement of the trade balance, which is expected to be better-than-forecast, I expect the uptrend to continue.
An entry is taken when prices drop towards the uptrend line. Once the price bounces off the uptrend line, an entry is taken at the price of 1.5525. A stop loss of 50 pips is placed below the previous low since I do not expect prices to fall below that. I will have two targets on this trade: exiting the first position at 1.5575 and the second position at 1.5625.
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Disclaimer
The analysis we provide is based on the average estimate of price movements in one day. Does not guarantee what we deliver is actually a proper and correct. Everything that happens in the decisions you make on your trading transaction is to be Your responsibilities.
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