- Forex Commentary -

September 7, 2010 (FinancialWire) (Investrend Information Syndicate) (Via Brewer Investment Group) (Overnight, September 3, 2010, Report) — Friday’s better than expected U.S. Non-Farm Payrolls data put risk back on the table. Although this report showed that the economy was still shedding jobs, private sector hiring was above the consensus, driving investors into equities and out of gold and Treasuries.

The shift in risk sentiment drove the U.S. Dollar lower especially against the commodity-linked currencies. The Japanese Yen was also punished as traders left the safety of the lower yielding currency.

Upside momentum was building in the Australian Dollar, putting it in a position to test the early August top at .9221. Recent Aussie economic data also led to speculation that the Reserve Bank of Australia would raise interest rates at its next meeting on September 7.

The USD JPY traded sharply higher this morning, but the strong gains faded after a report showed the U.S. Services Sector slowed during August. The rise in demand for stocks appeared to be reviving the carry trade earlier in the session. This is a situation where investors borrow the lower yielding Yen then sell it to invest in higher yielding assets.

The Japanese Yen began to strengthen against the Dollar after the weak U.S. ISM Services index indicated slower growth. The Dollar/Yen pared its gains while some traders took defensive positions against the possibility of a weaker U.S. economy.

The chart pattern suggests a possible double-bottom formation. This pattern will be confirmed if 85.90 is broken and at the same time will signal a change in trend to up.

The strong rise in the Euro is a sign that investors are becoming confident that European economies may be emerging slightly ahead of the U.S. economy, carried by great economic numbers from Germany.

Earlier in the week, the European Central Bank left interest rates unchanged, but post report comments from ECB President Jean Claude Trichet provided some support for the single currency when he announced that the central bank would continue to provide a range of emergency funding to commercial banks through the end of 2010. He also downplayed the strength of the economic numbers which he tends to do each time the Euro Zone economy appears to be turning the corner.

Thin trading conditions may have contributed to the sharp break in the Dollar this week, so we are likely to find out next week where investors stand on the Greenback. Although the U.S. employment data was slightly better than expected, the country did lose jobs for the month. Some feel that this report took some of the pressure off the Fed to implement additional quantitative easing, but others remain concerned about the slow down in the economy because of today’s weaker ISM services data.

If T-Bonds continue to break and equities rise, then this will be a sign that trader appetite for risk is back on. This will lead to more pressure on the Dollar. The tricky market will be the Dollar/Yen. The revival of the carry-trade will pressure the Yen, but further weakening in the U.S. economy may encourage traders to dump the Dollar in favor of the Yen. If this occurs, then look for renewed talk about Japanese government and Bank of Japan intervention. The Yen by far will be the most difficult market to assess over the short-run and should be avoided until the catalyst driving this market can be identified with clarity and conviction.

Source: Courtesy of Brewer Investment Group, LLC; For more information, content and/or a preferred introduction to Brewer Investment Group, LLC and/or Brewer Futures Group, LLC, contact Investrend Syndications (via http://www.investrend.com/synd0001).

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Brewer Investment Group, LLC, advises that Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from Brewer FX, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as "spread" or "straddle" trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. For more information, content and/or a preferred introduction to Brewer Investment Group, LLC and/or Brewer Futures Group, LLC, contact Investrend Syndications (via http://www.investrend.com/synd0001).

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