U.S. Dollar Trading Mixed after Friday’s Employment Report Rally

The U.S. Dollar is trading mixed overnight following Friday’s rally. Traders drove the Dollar higher on Friday following the U.S. Non-Farm Payrolls Report.

The U.S. Dollar is trading mixed overnight following Friday’s rally. Traders drove the Dollar higher on Friday following the U.S. Non-Farm Payrolls Report. The actual report showed an increase in jobs during March, but the 162,000 jobs created were less than expected. At first the Dollar weakened, but upon further review, the news that more jobs was created by the private sector helped turn the Dollar around. Traders are starting to believe that after being used as a safe haven currency for quite a long time, the Dollar may start to return to its traditional relationship with the economy.

The strength in the U.S. economy is helping to keep the pressure on the EUR USD which is trading lower overnight. In addition, last week’s sell-off in Greek bonds indicates that Euro traders may be losing confidence in Greece’s ability to finance its debt and shore up its finances.

Optimistic traders are helping to underpin the GBP USD. Trader sentiment seems to be turning a little more positive for the British Pound after the U.K.’s 4Q GDP report showed a greater than expected improvement and the S&P Corp. left the country’s credit rating unchanged. Gains could be hampered by political uncertainty and concerns about the budget deficit.

The improving U.S. jobs picture helped boost the USD JPY. Traders drove this currency pair to its highest level since August 2009. The strong possibility of an interest rate hike is making the U.S. markets a more attractive investment for Japanese investors. The Bank of Japan meets on April 6th. It is expected to keep interest rates low. In addition, officials may announce another stimulus plan to revive the economy.

The USD CHF is trading flat to better overnight. The weaker Euro is helping to underpin this currency pair. The Swiss Franc has been under pressure since April 1 following reports of a major intervention by the Swiss National Bank. Continue to look for more intervention if the Swiss Franc continues to appreciate against the Euro.

Stronger demand for crude oil, firm gold and a bullish stock market is helping to boost the Canadian Dollar. Overnight the USD CAD weakened further, taking out the most recent swing bottom at 1.0060. The charts and downside momentum indicate that this market is well on its way to testing parity with the U.S. Dollar.

The AUD USD is trading flat to higher ahead of Tuesday’s Reserve Bank of Australia meeting. Improvements in the global economy, led by robust growth in Chinese manufacturing and increased demand for commodities, are helping the Australian economy grow. Investors are expecting the RBA to increase interest rates by 25 basis points.

The NZD USD is under pressure for the fourth straight day. Last week the International Monetary Fund said the New Zealand Dollar is overvalued. It also added that the currency will break when the interest rate advantage over the U.S. narrows once the Fed begins to hike rates. The IMF also predicts the New Zealand current account will widen if the NZD remains at current levels.

Today, investors will be looking to add to the strength in the Dollar because of the improving U.S. jobs picture. Gains could be limited because of light post-holiday volume, however. Traders will be watching today’s U.S. ISM Non-Manufacturing Index for direction. The consensus is calling for a 54 number. This means that the economic recovery is broadening from manufacturing to services. Pending Home Sales is expected to show a drop of 1%.

The key to today’s market will be whether global investors believe the U.S. Jobs Report is a good indication of where the economy is headed. Some feel that the pace of the growth is still too weak to warrant a stronger Dollar. Others feel the U.S. economy has turned an important corner and that the jobs outlook will only get better.

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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