Payroll Day & Eurozone Spread Widening.

Today is all about US payroll numbers. its gonna be big,,, but how big.... that is the question..... The reason its gonna be big, as everyone knows is the census worker hiring. The average guesstimate according to Bloomberg is 536,000, however there is a large range from various analysts around this number ranging from the low 200,000s to the mid 700,000s. - I am always amazed that this number is given so much credence by markets, a number that is calculated using so many statistical adjustments, and that is revised so many times over the coming months, so much that its initial release is often meaningless, and yet it probably gets more focus in markets, and more initial trading reaction than just about any other data release on earth.

The markets over the course of this week seemed to have entered a period of calm, relative to action through May. The SP500 had its smallest daily trading range yesterday since late-April. EURUSD continues to gyrate in a spiraling downward fashion within its recent 1.2150-low 1.23s range. USDJPY has been gaining slowly on a less risk adverse environment, perhaps helped by the political situation in Japan, this may have helped calm currencies which reside on the other side of the carry, such as CAD and AUD. So it seems that near-term direction no wmay hinge on a number which is calculated using a somewhat contentious method, which is going to be distorted by a very heavy one-off adjustent, and which will be probably be revised several times over the coming months.

Meanwhile, it is worth a mention that periphery Europe spreads have been widening again over the course of this week. The Spain v Germany 2 yr spread has widened to 225bps and 10 yr spread has widened out to almost 190 bps, that is respective gains of 45 and 37bps over the past week. Other spreads have been widening too; Italy, Portugal, Ireland and Greece have started to rewiden, even France has widened so far this week from 26 - 39 bps, the largest weekly move since 1995. This may well be the early stages of the next phase of the Sovereign Debt crisis, with larger more significant European Countries becoming affected. -- Further to this I have posted a couple of charts below, the first chart is the 2 Year Spanish Gov Bond Yield weekly with 50 week moving average. In Technical Analysis parlance, this may have traced out a 'Rounded Bottom' or 'Frying Pan bottom' pattern, which could portent significant gains in yields in coming weeks. - Below that I have shown how a 'Rounded Bottom' pattern formed on Greek 10 year yields in the latter half of 2009, and how this evolved into the significantly higher yields (somewhat of an understatement) through this year.