Forex Trader Top 3
1. Employment Reports to Move Markets
In the present economy, employment reports are very important to FOREX markets. This morning, the Monster Employment Index upticked to 167 in March, from 165 in February. This is good news. It’s important to remember that the index is still 17 points below this time last year; however, today’s gain in the index, if even a small amount, is certainly better than a loss.
The mean estimate for jobless claims at 8:30 AM is 366,000.
The Spin:
It is important to remember that a significant portion of unemployment claims over the past year were due to layoffs within the housing sector.
Moreover, the recent existing home sales report, showed a 2.9% increase in February sales, over January. The gains came while the 30-year rate was moving up. After hitting a near-term top in March, the 30-year rate has declined from roughly 6.1% to the present 5.75%. The dip in rates is likely spurring buying, something that could stimulate employment with housing-related businesses. At present, it is too early for an all out reversal, however, today’s Monster Employment Report sprinkles a slight bit of hope that recovery could be on the way in the coming months. However, Friday’s Employment Situation report will be the week’s coupe de grace. Please say tuned for a full briefing tomorrow morning.
The Bottom Line:
Thursday’s employment reports are important to current market and U.S. dollar sentiment, even more so with the employment situation report forthcoming on Friday.
2. ISM Non-Manufacturing Index
The News:
Thursday’s ISM Non-Manufacturing report will be another piece of the ‘is this a recession, or just weak growth?’ puzzle.
The Spin:
February’s report confirmed contraction in non-manufacturing business and the economy – something investors are already aware of. However, February’s report did show a 3-percentage point increase, over the previous month – an optimistic occurrence.
While March numbers will likely be “inline” with February, traders will want to pay close attention to the Business Activity and Prices Paid numbers within the report. In February, business activity came in at 50.8, over 41.9 in the previous month. This morning, an uptick in business activity could aide market sentiment, even if the larger ISM number posts a slight decline. Moreover, coming into January, Prices Paid for materials and services increased for 57 straight months; clearly an inflationary red flag. However, in February, prices paid dipped. If prices paid declined again in March, even with oil near $100 a barrel, the event will likely bring supplementary market (and greenback) bulls in off the fence.
The Bottom Line:
Within the ISM non-manufacturing report, market and U.S. dollar bulls want to see an increase in business activity and a decrease in prices pain. Reverse numbers will likely take a toll on the major indexes and the U.S. dollar.
3. Subprime Leaking into the Global Arena
The News:
In July of 2007, CNBC reported that the 8% of all UK loans are made up of subprime, versus 20% in the United States. Clearly, the UK does not have the same subprime risk as the U.S. However, there is risk, and given actions in the U.S., the UK could be next.
Just recently, on March 12th, Reuters reported that Standard & Poor conducted a study on UK housing markets.
The news reporting agency said, “While the U.S. market has been hit with downgrades on hundreds of billions of dollars worth of subprime-related securities, including many rated triple-A, ratings for UK nonconforming mortgage bonds so far have been stable.”
However, on April 3, Bloomberg reported Lehman Brothers Holdings will completely stop writing mortgages at two UK units. What’s more HSBC also halted all UK home loans entirely, “after a low-rate home loan caused applications to rise fivefold.”
The Spin:
It’s important to remember that the subprime debacle extends beyond the United States. While American’s often forget that there’s a whole other world out there, for FOREX traders, we are keenly clued into the fact that we can profit globally.
What this means is that while the subprime debacle has hit the United States hard over the past 12-months, other countries are yet to have the issue surface.
The Bottom Line:
The above news does not bode well for the pound.
Mark Whistler is the founder of WallStreetRockStar.com and is the author of multiple books on trading. Mark’s newest book, The Swing Trader’s Bible – co-authored with CNBC/Fox News regular guest Matt McCall – will be on shelves in late summer, 2008. In addition, Mark also writes regularly for TraderDaily.com and Investopedia.com.