(As written for My Paper on 10 April 2012. Click here to enlarge)
All the excitement in the previous week came to a screeching halt when the US Labour Department released the hotly watched Non Farm Payrolls figures on Friday evening.
The 120,000 jobs added in March were the lowest in five months, underscoring Fed Chairman Ben Bernanke’s concern that recent gains may not be sustained without a pickup in growth.
The figure was all the more soberising considering that the average economist forecast in a Bloomberg survey was 205,000.
The silver lining in the gloomy numbers was the unemployment figures. This came in at 8.2%, down from 8.3% the month prior. The figure was the lowest since January 2009.
However, as I wrote in a previous article, the drop in the unemployment figure does not necessarily mean that more people in the nation are employed. This is because it masks the fact that some job-seekers simply give up hope in finding a job, and drop out altogether.
Upon the news release, the USD/JPY plunged 125 pips in an hour – from a high of 82.55 to a low of 81.30.
Europe’s on-going debt concerns and renewed worries over the US recovery have seen investors plow into US Treasuries at a record pace. This is because US Treasuries are widely seen as the world’s safest assets.
Since the start of 2012, buyers have bid $3.19 for each dollar of the $538 billion in notes and bonds sold this year. This is the highest figure ever recorded and it is on track to beat the high of $3.04 recorded last year.
Interestingly, the ever-increasing demand for US debt will keep yields low even if the Fed refrains from QE3. This will ultimately help President Obama to finance a fourth deficit exceeding USD1 trillion at low costs.
Elsewhere in Japan, the official figure of 1.18 trillion Yen for February showed that Japan has returned to a current account surplus. This was after a record deficit in January.
The figures caused USD/JPY to fall even further, as the figures from Japan boosted the allure of the Yen as an investment haven.
Top News This Week
Australia Employment Change, Thursday, 12th April, 9.30am. I expect figures to come in below 7K, (previous figure was -15.4K).
China quarterly GDP, Friday, 13th April, 10am. I expect figures to come in at 8.4% (previous figure was 8.9%).
Long EUR/CHF at 1.2030
On 6th September 2011, the Swiss National Bank (SNB) stunned the world by intervening in the Forex Market to weaken the Swiss Franc. They spent 11 billion Francs to buy Euros for the first time in more than three decades.
This caused the EUR/CHF to shoot up 1,150 pips in 3 hours.
In a specific statement, the Zurich-based bank said that it “will no longer tolerate a EUR/CHF rate below 1.20 and is prepared to buy foreign currency in unlimited quantities.”
At the close of the markets over the weekend, EUR/CHF actually dipped 2 pips below the self-imposed floor set by the SNB. The bias is for us to go long in anticipation of another impending intervention by the SNB.
We will go long once EUR/CHF rises to 1.2030. A stop loss is set 50 pips below the entry price. We will have 2 targets on this trade.
Entry Price = 1.2030
Stop Loss = 1.1980
1st Profit = 1.2080
2nd Profit = 1.2130