Previous session overview
The dollar gained ground versus the Japanese yen and the euro in choppy trade Friday after the U.S. Labor Department said the unemployment rate jumped in August to its highest level since 1983.
The dollar traded at JPY92.97 versus the Japanese currency, up from around JPY92.71 just ahead of the figures and JPY92.75 in North American activity late Friday.
The dollar initially dipped below JPY92.20 versus the Japanese unit after data showed the unemployment rate jumped to 9.7% from 9.4% in July. Economists had forecast a rise to 9.5%.
At first, the market traded on the unemployment rate, which rose to its highest level since June 1983. As a result, traders pared back riskier positions in higher-yielding assets like the euro and shed dollar holdings on fears for the U.S. economy. They drove the safe-haven yen to session highs.
Nonfarm payrolls, meanwhile, contracted by 216,000, less than the 233,000 decline projected by economists.
The euro initially dipped versus the dollar, regained its footing and then slipped again to change hands at USD1.4237 in recent action, down from USD1.4252 ahead of the data and down from USD1.4249 late Thursday.
Market expectation
EURUSD chatter mentioning that solid bids appeared in the euro in the USD1.4190’s, consistent with our report earlier, chatter linking the interest to both semi-official demand and Asian sovereign. As noted, talk earlier in the week cited that latter name as a euro buyer off lows with traders still focusing on a broad USD1.4200is/1.4400ish range, some saying downside doesn’t open up until USD1.4150 gives way.
Pound recovered off pullback lows around USD1.6288, the rate edging back to USD1.6318. Offers now seen placed between USD1.6320/25, with bids remaining in place between USD1.6285/80. Below here and retail interest seen positioned between USD1.6270/50.
EURJPY sharp swings continue in thin trade as the cross come back to test the downside after failing to break into the Ichimoku Cloud. Initial lows placed at JPY131.69 so far holding, ahead of trend line support from the July lows at JPY131.25.
G20 ministers set to gather in London Friday night and Saturday are expected to broadly discuss a framework for a coordinated withdrawal of massive stimulus measures once the economic crisis has passed. No immediate withdrawal of government support is foreseen, however, in light of the still-fragile nature of the recovery despite signs of an earlier-than-expected recovery in some areas.
Source: Dukascopy