Together with warm weather the month of May is filled with worries about the possible correction in market prices. Throughout the history of forex, experienced traders have learned a golden rule – the month of May has a very bad reputation. To be more precise, it is linked to a selloff in the stock market. The psychology behind this is that May happens to be the important point where traders reconcile the first quarter results and go over the earnings guidance for the rest of the year. Unsatisfied investors in May mean only one thing – a major selloff of indices such as NASAQ, S&P and Dow Jones.
So here we are at the point where investors begin to focus on the data from the earnings reports released and the market becomes unstable. Nevertheless, your attention should be on the main highlight of this week – Friday’s Non-farm Payrolls report. This is one of those events that will cause the market to go one way or another.
When you wait for Non-farms Payrolls, you have to expect the worst but do not lose your hope completely. Last month caused the dollar to wobble mostly due to weak NFP data. This week, if NFP shows around 150K new jobs or less, the weak data might be considered as a trend, causing the traders to ditch US economy and sell US dollar out. The selling of dollar, meanwhile, will cause the other major currencies such as Euro and Australian dollar to gain.
Statistically speaking, while preparing for the worst (aka weak NFP data), you cannot help but notice that usually after similar sharp falls in the past, NFP usually tends to correct itself. 200K new jobs, for example, will make dollar attractive and hit commodities in negative way.
The Wall Street will be affected by two causes – earnings and NFP data. Higher numbers on S&P, Dow and NASDAQ can be expected in case of strong earnings and better than expected NFP results. Stocks will climb low in case of disappointing earnings together with low NFP.
Other events to keep your eyes on are:
RBA Rate Decision on Tuesday – with an outstanding statement from RBA, you might see Aussie gaining even more.
ADP Employment Change on Wednesday – ADP data will give a faint indicator on NFP Friday’s release. Data higher than 200K could cause dollar to rise until Friday.
Aussie Unemployment on Thursday – watch the unemployment rates for better understanding on the policies. Unemployment lower than 6.1% could make Aussie stronger.
UK Elections on Thursday – UK elections are taking place on May 7th and will be one of the important events for Sterling lovers and FTSE investors. As of now, it is vague which party is going to win and both can turn UK economy to better or worse.
US Nonfarm Payrolls on Friday – And here is out highlight of the week. In case of weak data of 150K or less, expect to see negativity for the dollar.
Since the beginning of 2015, The EUR/USD pair went down 1,500 pips. Furthermore, EUR/USD bears have now pressed the market somewhat lower the monthly demand level at 1.0550.
The earlier monthly closure had a negative impact on the EUR/USD pair. Yet, April's monthly candlestick shows bullish engulfing candle. This may suggest continuation of the bearish decline for a while. Meanwhile, it may improve a short-term bullish corrective movement towards 1.1350.
Japanese Yen continues its descend against the USD. The pair is currently traded close to the resistance level. If broken, the quotes may reach 121.90.
Monday session for GBP/USD was rather dull and quiet due to lack of economic news. Supply levels are around 1.5300 and 1.5500, offering strong bearish weight over the GBP/USD pair for a few months. Obvious bullish retrieval arose off the price levels near 1.4550 where a important bullish engulfing weekly candlestick was witnessed. Tenacity beyond the zone of 1.5000-1.5080 showing the weekly supply zone at 1.5500-1.5550 where important bearish weight was witnessed.