Lea Jakobiak
Unemployment in Britain has fallen to a five year low. The pound rose on the latest good news from Britain.
Article / 07 March 2012 at 9:55 GMT

Retracement guessing game ahead of ADP, ECB & NFP

John J Hardy John J Hardy
Head of FX Strategy / Saxo Bank

With very little news out overnight, we’ve got the market picking through the damage the USD has done this morning and anticipating where it needs to jump back into the action as the ECB and US employment report rolling over the next two days.

The only economic data point of note overnight was the slightly disappointing Australian GDP number for Q4 for those of us interested in the ancient past of last quarter’s economic growth. Meanwhile, the Australian AiG construction survey dipped to a very weak 35.6 and has been below 50 since June of 2010. That’s a spectacular run for a survey of this kind. Also overnight, we had a Chinese response to a US trade bill that was aimed at maintaining import duties on products the US deems are over-subsidized by China. China said the bill is “not consistent with US law” or WTO rules. The arena of trade protectionism becomes an interesting one as China tries to transform its economy in coming years.

GBPUSD suffered ugly damage yesterday, confirming that the recent break of the 200-day moving average was a false one. By the end of the week, we will get an idea of whether the pair will simply continue to be very volatile within a range or if it is set for a lower test of 1.5500 or beyond if the 1.5650 area support gives way. Note that the 1.5800-ish area was a neckline of a head and shoulders formation on the hourly charts.


Scandie traders were in for real volatility yesterday, as the Scandies proved to be the G10’s weakest currencies yesterday, an especially interesting development as it belied the notion that they could serve as Their Achilles heel? While they both have solid balance sheets, their critical weakness in times of market stress are their lack of liquidity. SEK is the weaker of the two and this 8.93 area looks important in EURSEK, with a break possibly triggering a run on the 9.05 200-day moving average if this risk sell-off deepens. Watch out for Riksbank governor Ingves out speaking later.


Further panic or consolidation?
Elsewhere, the market is looking around and dusting itself off after volatility reared its ugly head yesterday in a fashion we should all be familiar with in ever-upward-grinding-no-real-retracement markets like we saw since mid December. Asymmetric volatility is a signature of markets dominated by the carry trade – though actually during the windows of time when a volatile sell-off develops, two-way volatility potential increases, as initial bounces are often equally vociferous once the selling recedes. The JPY crosses are likely to remain the highest beta plays in the shortest term.

Looking ahead
Today, we have German factory orders up at 11:00 and the US ADP employment change data, which last time around fell far short of the non-farm payrolls data, though the previous month’s ADP number was an outlier to the strong side, so the two taken together. The market doesn’t know what to do with the ADP survey lately. Please see Macro Mads’ post on today’s numbers.

Tomorrow, we have the ECB, which may do a simultaneous hawk/dove act by continuing to discourage the notion that there will be further long term LTRO’s on offer any time soon (very high odds), while at the same time setting the market up for further interest rate cuts (even odds). The former is largely priced in, the latter – if the ECB makes interest rate cut hints – is not priced in.

Busy Asian session ahead!
Look out for the RBNZ out tonight at 2000 GMT. The market has actually priced in 25 bps of tightening for the next 12 months. The kiwi has rebounded smartly as AUDNZD selling came in yesterday, but the RBNZ has a rather high bar if it is to encourage the market’s rather stretched view on the hawkish case. Also in Asia, watch for the Japanese trade data and how the market reacts after the sharp correction in JPY crosses. Finally, the Australian employment report is up tonight and a weak one could see the AUDUSD testing its key structural support at the 200-day moving average (just above 1.0400).

Economic Data Highlights

  • Australia Feb. Performance of Construction Index out at 35.6 vs. 39.8 in Jan.
  • UK Feb. BRC Shop Price Index out at +1.2% YoY vs. +1.4% in Jan.
  • Australia Q4 GDP out at 0.4% QoQ vand +2.3% YoY vs. +0.8%/+2.4% expected, respectively and vs. +2.6% YoY in Q3
  • Switzerland Feb. Unemployment Rate out unchanged at 3.1% as expected
  • Spain Jan. Industrial Output out at -4.2% YoY vs. -4.3% expected and vs. -3.5% in Dec.
  • Norway Jan. Industrial Product Manufacturing out at +1.1% MoM and +1.7% YoY vs. +0.4%/+0.8% expected, respectively and vs. +0.7% YoY in Dec.

Upcoming Economic Calendar Highlights (all times GMT)

  • Germany Jan. Factory Orders (1100)
  • US Feb. ADP Employment Change (1315)
  • Canada Jan. Building Permits (1330)
  • US Weekly DoE Crude Oil and Product Inventories (1530)
  • Sweden Riksbank’s Governor Ingves out speaking (1700)
  • US Jan. Consumer Credit (2000)
  • New Zealand RBNZ Cash Rate Announcement (2000)
  • New Zealand Q4 Manufacturing Activity (2145)
  • Japan Jan. Current Account (2350)
  • Australia Feb. Employment Change and Unemployment Rate (0030)
  • Japan Feb. Preliminary Machine Tool Orders (0600)


The Saxo Bank Group provides an execution-only service and all information provided on is solely for general information. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. Saxo Bank Group will not be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available as part of the or as a result of the use of the Any information which could be construed as investment research has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such should be considered as a marketing communication. Furthermore it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Please read our disclaimers:
- Notification on Non-Independent Investment Research
- Full disclaimer

Show latest activity
Sorry, there was a problem communicating with the servers. We are working hard to solve this. Please try again later.
Oops! There was a problem communicating with the OpenAPI Portfolio service.
Oops! There was a problem communicating with the OpenAPI History service.
Oops! There was a problem communicating with the OpenAPI Reference service.
Oops! There was a problem communicating with the OpenAPI Root service.
Oops! There was a problem communicating with the OpenAPI Trading service.
Sorry, there was a problem communicating with the Financial Calender servers. We are working hard to solve this. Please try again later.
Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail