THE TAKEAWAY: USD Initial Jobless Claims (JUN 15) > 354K versus 340K expected, from 336K (revised higher from 334K) > USDJPY BEARISH
The first US labor market report after the Federal Reserve noted a heightened sensitivity to such data came in weaker than expected, fueling overnight risk aversion. Yesterday, in its policy statement following its June rate decision, the Fed noted that “The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall,” perhaps the clearest sign of an official nod to the improvement in the labor market. Accordingly, with the Fed insinuating that if the Unemployment Rate dropped to 7.0% it might warrant a reconsideration of QE3, there was increased focus on today’s Initial Jobless Claims (JUN 15).
The jobless claims report disappointed, sucking the air out of the USDJPY rally that continued overnight. Claims rose back to 354K from 336K, with the headline print rising above the three-, six-, and 12-month averages at 346K, 345K, and 349K, respectively. With the prior print revised higher from 334K, the overall change was 16K worse than expected. While the figure suggests NFP growth remains in the +160K to +180K neighborhood, it at least perpetuates the belief that a period of soft US growth is onset, thanks to the untimely budget sequestration enacted in March.
USDJPY 1-minute Chart: June 20, 2013
Charts Created using Marketscope – prepared by Kevin Jin
The market reacted by slamming the USDJPY down towards ¥97.55 after the pair traded above 97.80 for most of the European session. The decline in the USDJPY after the jobless claims disappointment comes after a tremendous bull rally after the FOMC meeting yesterday. Price action shows that traders attempted to push the USDJPY back up to 97.80 after the jobless claims data, but the pair was shortly rejected at this level. The pair trades back down from 97.80 and remains at 97.65 at the time of writing, as bulls and bears battle for positioning in this largely volatile currency pair.
--- Written by Christopher Vecchio, Currency Analyst
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