US Non-Farm Payrolls Set To Create Significant Market Volatility Today

Speculations that US lawmakers will be unable to reach an agreement to boost the nation's borrowing limit before the government runs out of money in the next two-months, boosted safe-haven assets yesterday. Both the US dollar and Japanese yen saw upward movement as a result against their higher-yielding currency rivals. Today, the main piece of economic news is likely to be the US Non-Farm Payrolls (NFP) report, set to be released at 13:30 GMT. Widely considered the most important indicator on the forex calendar, the NFP report is certain to generate significant market volatility.


Economic News

USD - All Eyes on US Employment Data Today

The US dollar saw gains against most of its main currency rivals yesterday, as attention shifted away from the recent “fiscal cliff” agreement, to the US debt ceiling. Lawmakers now have two month's to reach an agreement to raise the nation's borrowing limit before the government runs out of money. Concerns that an agreement will not be reached in time led to risk aversion, which boosted the safe-haven greenback.

The USD/CHF gained close to 50 pips during the European session to eventually trade as high as 0.9241, before a minor downward correction brought the pair to 0.9229. The GBP/USD fell more than 90 pips during the same time period to trade as low as 1.6143 before bouncing back to the 1.6170 level.

Today, all eyes will be on the US Non-Farm Payrolls (NFP) figure, set to be released at 13:30 GMT. Analysts are predicting that US employers added 135K jobs in December, slightly less than November's final result of 146K. If the indicator comes in below the expected level, safe-haven currencies like the USD and JPY could see bullish movement before markets close for the weekend. Conversely, a better than expected NFP report will likely boost riskier assets, including crude oil, the euro and the AUD.

EUR - Euro Extends Losses amid Risk Aversion

The euro took losses against several of its currency rivals yesterday, as new fears that the US government will soon reach its limit to borrow funds led to risk aversion in the marketplace. The EUR/USD fell close to 80 pips during the European session, eventually reaching as low as 1.3082, before bouncing back to the 1.3100 level. Against the Japanese yen, the euro lost more than 100 pips to trade as low as 113.62, before bouncing back to 113.90 during the afternoon session.

As markets get ready to close for the weekend, euro traders will want to pay close attention to today's US Non-Farm payrolls report. A better than expected result is expected to generate risk taking in the marketplace, which could help the euro recoup some of its recent losses. In addition, Italian and Spanish service data, set to be released during the morning session, could benefit the common-currency if they come in above their expected levels.

Gold - Gold Takes Losses amid Dollar Gains

The price of gold saw downward movement yesterday, as risk aversion in the marketplace boosted the safe-haven dollar, which made the precious metal more expensive for international buyers. Gold fell close to $12 an ounce during European trading, to trade as low as $1675, before bouncing back to $1681 during the afternoon session.

Turning to today, gold traders will want to focus on the US Non-Farm Payrolls figure and its impact on the USD. A better than expected figure is expected to weaken the safe-haven greenback, which could boost gold prices before markets close for the weekend.

Crude Oil - US Inventories Data Set to Impact Oil Prices Today

After reaching a three-month high earlier in the week, the price of crude oil saw relatively little movement yesterday as investors hesitated to open large positions ahead of US inventories data today. The commodity fell some $0.45 during early morning trading, to trade as low as $92.50, before bouncing back to $92.90 during afternoon trading.

Today, in addition to key US employment data which is expected to generate volatility in oil prices, traders will want to pay attention to the US Crude Oil Inventories figure at 16:00 GMT. Analysts are predicting that the figure will come in at -1.9M, which if true, would signal an increase in US demand and boost oil prices before markets close for the weekend.

Technical News

EUR/USD

The Bollinger Bands on the weekly chart are narrowing, indicating that a price shift could occur in the near future. Furthermore, the Williams Percent Range on the same chart has crossed over into overbought territory, signaling that the price shift could be downward. Opening short positions may be the wise choice for traders today.

GBP/USD

While the Williams Percent Range on the weekly chart is in overbought territory, most other long-term technical indicators are currently in neutral territory, making a definitive trend difficult to predict at this time. Taking a wait and see approach may be the best choice for traders, as a clearer picture is likely to present itself in the near future.

USD/JPY

The Relative Strength Index on the weekly chart has crossed into overbought territory, indicating that a downward correction could occur in the near future. This theory is supported by the daily chart's Williams Percent Range, which is currently at -10. Opening short positions may be the wise choice for this pair.

USD/CHF

A bullish cross on the weekly chart's Slow Stochastic is signaling that this pair could see an upward correction in the coming days. Additionally, the Williams Percent Range on the same chart has dropped into oversold territory. Traders may want to open long positions today, ahead of possible upward movement.

The Wild Card

Crude Oil

The Relative Strength Index on the daily chart has crossed into overbought territory, indicating that a downward correction could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. This may be a good time for forex traders to open short positions, ahead of possible downward movement.