TheLFB-Forex.com A Forex Trader Portal
Trade Desk Thoughts:
NFP Creates Dollar Swing Point
The main theme for the month of December was dollar strength. No matter what the macroeconomic numbers showed, the dollar saw only long orders in December, mainly following the strong NFP data released at the beginning of the month.
However, what strengthened the dollar - October’s NFP numbers, released on Dec 04 2009 - turned out to be a big disappointment last Friday, when the employment data for the month of November hit the newswires at -85K, when the market was expecting a -3K read.
This fundamentally has created a medium term swing point for the dollar. The greenback was getting stronger in December in-line with traders re-pricing the recovery of the U.S. economy, putting it higher than the recovery rate seen in the Euro-area. However, the newest data coming from U.S. labor market is less positive, and is something that yet again re-prices the currency market by weakening the dollar index.
Even though the NFP numbers are moving in the right direction, analysts have shown that the U6 rate (which is the broadest rate that measures labor underutilization) surged to 17.9% in October, the most over the last few decades.
All the market needs to see to be able to buy the EUR/USD again is some favorable macroeconomic reports coming from the euro-area. In this way, an important test might be on Thursday, when the inflation hawk Trichet will host the ECB’s monthly interest rate Press Conference. Over the last few conferences, Mr. Trichet has complained about the weakness of the dollar, so it would not be a surprise to hear that again. However, this factor is already discounted by the financial markets, so other than the near-term volatility, the EUR/USD direction is long right now.