Greenback Down for Week but Jobs Data Offers Ray of Light

The U.S. Dollar finished lower for the week, but a rally onFriday helped offer a ray of light for the Greenback.

The U.S. Dollar finished lower for the week, but a rally onFriday helped offer a ray of light for the Greenback.

The U.S. Dollar strengthened against most major currenciesafter the government said the non-farm payrolls grew by 151,000 in October,exceeding pre-market guesses. The Labor Department also revised upward payrollsfor August and September. The strong showing helped keep October’s unemploymentrate at 9.6%.

The strong showing from the jobs data report helped the U.S.Dollar recover some of its earlier losses particularly against the Euro andBritish Pound which suffered big losses. The fresh employment data helped giverisky assets a boost, driving up demand for commodity sensitive currencies suchas the Australian, New Zealand and Canadian Dollars.

The main trend is down for the Dollar against most majors,but the rate of decline seems to have slowed down. The Dollar Index remainsbelow a swing top and downtrending Gann angle which indicates continuedpressure until the market can penetrate either one of these resistance points.The inability to produce a weekly closing price reversal this week leaves thismarket vulnerable for a new low next week. If this occurs early in the week, thenbullish traders may attempt to produce a weekly reversal once again.

Getting back to the jobs data, the economy needs to becreating at least 250,000 jobs or more to get back on track. Even though theFed pledged $900 billion in quantitative easing earlier in the week, thisdoesn’t mean that employers will start hiring. Employers are waiting forconsumers to step up their game before they will start bringing in new workers.

Technical signs are building in the USD JPY which indicatesimpending volatility. Overnight the Japanese Yen had very little reaction tothe Bank of Japan’s decision to hold interest rates unchanged and the releaseof details of its recent liquidity-injection campaign.

The Euro was down sharply on Friday but held on to itsweekly gains. Based on the short-term swing of 1.3733 to 1.4282, traders shouldwatch for a pull-back to 1.4008 to 1.3943.

The GBP USD reversed Thursday’s rally. At the close thismarket was approaching an uptrending Gann angle at 1.6130. A failure to holdthis level could trigger an acceleration to the downside with a potentialtarget zone at 1.5974 to 1.5897. This zone represents 50%/.618 retracement ofthe 1.5650 to 1.6298 range.

Friday’s strength in the Dollar appears to have shiftedinterest away from the Fed’s quantitative easing action from earlier in theweek and back onto the economic fundamentals. This may be only a temporarycondition as most traders should realize that the employment news is only a oneday event so far. One key to sustaining the strength in the Dollar will bewhether the jobs data can begin to form an upward trend.