FOREX: Dollar May Gain as S&P 500 Futures Show Traders Bet on Weak US Jobs Data | Learn Forex | GoLearnForex.com

Overnight Headlines

• Yen Gains on Risk Aversion Ahead of US Jobs Report, Kan Vote
• Conflicting Chinese Services PMI Data Fails to Move Markets
• Euro, British Pound in Narrow Ranges as Nonfarm Payrolls Loom

Critical Levels

The Euro held in narrow ranges overnight, with the single currency tracking sideways in a choppy band near the 1.45 level to the US Dollar. The British Pound edged narrowly lower in the first part of the session after settling into its own narrow range as markets braced for the closely-watched US employment report ahead.

Asia Session: What Happened

The Japanese Yen stood out in an otherwise quiet overnight session, rising as much as 0.4 percent against its major counterparts. The currency capitalized on an uneasy mood ahead of the upcoming US jobs report, with traders still shell-shocked after a preliminary report from ADP revealed the weakest private-sector employment increase in eight months earlier in the week.

Fears of deepening malaise in the world’s top economy – a crucial export market for Asian firms – sent the region’s shares lower and encouraged an unwinding of other sentiment-sensitive exposure including carry trades funded on the cheap in the perennially low-yielding currency. The MSCI Asia Pacific regional stock index fell 0.3 percent. The Yen got an added boost from news that Prime Minister Naoto Kan survived a no-confidence vote, removing some of the political uncertainty that had weighed on the Japanese unit yesterday.

On the data front, conflicting Chinese Services PMI readings – one from official sources and one from HSBC – seemed to have little overall impact on price action. The government’s report showed growth in the sector slowed in May but registered at significantly faster pace, while the HSBC version showed improvement but printed significantly lower in absolute terms.

Euro Session: What to Expect

A muted economic calendar is likely to see currency markets locked in tight ranges through the European morning as traders dig in their heels for the release of US employment figures in the afternoon. Expectations call for the world’s top economy to add just 165,000 jobs in May, the least in four months, pointing to headwinds for risk appetite and opening the door for losses across the spectrum of stocks-correlated currencies. S&P 500 stock index futures reveal traders’ apprehension ahead of the release, trading down 0.3 percent to touch the lowest level in six weeks.

Shares are pushing slightly higher in early trade, with optimism fueled by news reports suggesting EU policymakers have reached an agreement on a second Greek bailout. Indeed, Greek CDS rates – a measure of the priced-in likelihood of default in the beleaguered Mediterranean country – fell 50 basis points to the lowest in two weeks. UK Services PMI amounts to the most significant item on the docket, with expectations calling for growth in the sector to slow for the second consecutive month in May.

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