EUR/USD Daily Video, 10 March 2017

[Sive Morten]

Good morning,

EUR has used it's last chance to move higher on ECB comments, but right now to continue upside action - it should not retun back to lows:



The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.

 

[drebg]

Sive,

Can you please explain to me WHY, in today's and last month's BETTER than expected NFP reports, did the EUR/USD jump versus decline on strong USD data?

 

[Zilvinas]

Sive,

Can you please explain to me WHY, in today's and last month's BETTER than expected NFP reports, did the EUR/USD jump versus decline on strong USD data?

Because in speculation (not investing) trading is about expectations not the facts (buy the rumours, sell the facts). Everyone already knew that NFP probably would be good and they traded into that, and then after NFP took a profit.
The same will be with FED on Wednesday if FED won't be hawkish enough, I mean, if after statement and in press conference they won't say anything about more hikes or give hopes for more hikes in the near future then USD will be down, because everyone will take a profit. So it's not about a hike in Wednesday, because it's probably already on the table, but about the future expectations of more hikes.

And plus on the EUR the ECB narrowly but still a little bit is changing their language (and will change more and more if inflation and especially Core will go up), so that is good for EUR, because it gives expectations of the near end of QQE.

 

[drebg]

Thank you for the feedback… I understand and appreciate your explanation, but it doesn't explain why movements in favor or against USD for instance, DO typically directly correlate with a positive or negative NFP report by-in-large. If it were as you describe, then NFP numbers would ALWAYS be a contrarian indicator of which direction to place your trades (meaning, selling USD on favorable NFP data would be the norm- yet it is not).

 

[stelore]

Morning everybody!
Probably big Traders, after the good ADP numbers, already priced in better NFP and Labor market report.....

 

[Sive Morten]

Thank you for the feedback… I understand and appreciate your explanation, but it doesn't explain why movements in favor or against USD for instance, DO typically directly correlate with a positive or negative NFP report by-in-large. If it were as you describe, then NFP numbers would ALWAYS be a contrarian indicator of which direction to place your trades (meaning, selling USD on favorable NFP data would be the norm- yet it is not).

Hi DrebG. It is not neccesary so. You should take a look at larger picture. When Investors just expect to get first movements from the Fed on rate - they catch for any new input that could make impact on Fed. That's why, prior changing in long-term rate cycle - NFP was watching for sequent of positive data, and reaction was direct - bad NFP - bad USD, good NFP - good USD. As Fed has started inflationary spiral and rate hike cycle - market doesn't look at separate NFP, because cycle already has started which means that economy condition is known for Fed. All that market would like to know is when Fed will rise rate next time. Other words, the treatment of NFP has changed and its role in assessing of ongoing processes around rate hiking as well.
Also on different stage of economy cycle investors monitor different part of NFP report. This is not just single number of employment, but also wage dynamic as well. This is major indicator. Thus, Feb data shows that wage inflation has slowed and this makes direct impact on rate... this is another, fundamental explanation of USD weakness on Friday.

Besides, there is rumor that ECB could rise rate prior QE program will be closed (this should be in Dec).
All other stuff is correct by Zilvinas...