Forex Analysis: Initial Claims Edition

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 |  Includes: FXA, FXB, FXE, FXY, UDN, UUP
by: Ron Finberg

Eyes are back on the economy after yesterday’s downward revision to U.S. GDP and FOMC minutes revealed some FED members prefer further easing. As a result the dollar gained yesterday as it took advantage of its “safe haven” status. Also higher were prices of gold which finally found buyers after falling as much as 7.5% from last week’s highs.

With Thanksgiving being celebrated tomorrow, initial claims and durable goods figures are being pushed up to today. Since the beginning of the week we have been looking forward to today’s initial claims numbers. Last week’s claims figure made it three weeks in a row of sub 400,000. However, the general market shrugged off the data as focus was on Italy and a negative report by Fitch on the U.S. banks. Nonetheless, our belief is that another better than expected number wouldn’t be ignored as it will reflect an entire month of data and trigger talk of a strong non farm payrolls number next week.

In such a scenario, we would for the USDJPY to trade higher as it has been meandering around 77.00, waiting for new direction. On the other hand, if initial claims numbers returns to above 400,000 levels, it will support yesterday’s negative U.S. news and lead Forex traders to selloff risk again.

EURUSD

The EURUSD continues to be range bound as it has bounced up and down through the 1.3500 level. As the chart below shows, it has spent most of its time between 1.3440 and 1.3560. Currently, Forex Traders are taking advantage of the lack of direction in to place retracement trades as the pair nears it upper and lower ranges. When direction does return though, the EURUSD looks primed as a breakout candidate when it finally trades out of the range.

Intraday Support/Resistance 1.3440/1.3560

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GBPUSD

Other than a few brief moves lower as a result of overall risk selling, the GBPUSD continues to find support at 1.5600. Its ability to hold this level, as well as setting a base at 1.5725 last week, signals that there is real demand willing to step up and support the GBPUSD. The question now is whether the buyers will step of their demand, or continue to be passive and let the market come to them. We will be especially watching the reaction in the GBPUSD following this morning’s MPC Minutes, and whether 1.5600 will hold on negative news. If support holds in such a scenario it would be a bullish sign for the GBPUSD and could lead to positive momentum the rest of the week.

Intraday Support/Resistance 1.5570,1.5605/1.5690,1.5735

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AUDUSD

After finding support at 0.9800, the AUDUSD fell in overnight trading. As mentioned yesterday and in our weekend analysis, money appears to be rotating out of the AUD. Yesterday’s trading did little to disprove this theory as the pair failed to trade above 0.9900 as it hit selling pressure any time it approached that figure. Looking ahead, we are watching how the AUDUSD reacts if today’s initial claims data triggers an overall risk rally in the markets. If the AUDUSD fails to trade higher than 0.9830 in such an environment, it will add another indication that interest in the AUD and the “carry trade” is waning.

Intraday Support/Resistance 0.9745/0.9830

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.