Dollar Rallies as Employment Report Signals Strengthening Economy

The U.S. Dollar is rallying at the midsession on the notion that today’s better than expected U.S. Non-Farm Payrolls Report is a signal that the U.S. economy will recover from the recession faster than the rest of the world.

The U.S. Dollar is rallying at the midsession on the notion that today’s better than expected U.S. Non-Farm Payrolls Report is a signal that the U.S. economy will recover from the recession faster than the rest of the world.

Traders are also gaining confidence that the U.S. Federal Reserve will be the first central bank to announce a hard date for the start of an exit from its current easy money policy.
Speculators are also betting that the U.S. will be the first country to raise interest rates because of the improvement in the economy.

The early in the week rally in the GBP USD has been erased by the selling pressure these past two days. A break was triggered yesterday when the Bank of England announced it would increase the amount of funds available for quantitative easing. The move was accelerated to the downside this morning following the release of the better than expected U.S. employment report. Technically this market is in a position to post a weekly closing price reversal down.

The EUR USD is also in a position to post a daily reversal down following a rally to a new high for the year earlier this week. Speculators are betting that the developing strength in the U.S. economy will encourage the Fed to begin raising rates before the European Central Bank

The USD CAD is rallying at the midsession. Traders are buying the U.S. Dollar in expectation of a strong recovery in the economy. Canadian Dollar bulls are ignoring the strong stock market and are instead focusing on the possibility of an interest rate hike by the Fed or at least the announcement of the start of an exit strategy at next week’s Fed meeting.

The AUD USD is under pressure today and may close lower for the week. This weekly reversal down could signal the start of a major top. Traders are taking profits after a strong rally on the notion the Fed may announce the start of an exit strategy or at least propose a hard date when they will begin hiking interest rates. A hike in U.S. rates will hurt demand for the higher yielding Aussie Dollar.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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