Friday March 4, 2005 - 17:08:45 GMT
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The Voice of FXstreet.com - Weekly Report
DID ANYONE CARE OF THE STATE OF THE ECONOMY EVER?
After today’s NFP data, which came out at a positive 262,000 number, the USD plunged against the major currencies, in a very unexpected reaction.
Despite the good data, the USD is suffering a strong sell-off in a very much unexpected reaction from big currency players. Despite what one may hear on TV or read on the internet, the brutal USD sell-off is totally unjustified and does not respond to fundamental reasons, the same reasons that justified previous USD down-legs.
The US Economy is growing, the labor market is improving at a much better pace than in other areas, namely Europe and Japan, and the trade deficit number, though a tough barrier for a faster economic recovery, is narrowing slowly, but streadily.
Therefore, having Europe’s economic motor, Germany, with its worst unemployment rate since 1945, a worst interest rate, and some of the EMU countries unable to face the trade deficit agreement, one should think that the european economy is so strong against the US’s? In other words, does the current economic situation mean that the Euro has to be overvalued by more than 30% with respect to the USD? Isn’t this a political game? Have no better answer myself to this question.
If you have been reading my previous weekly reports, you know that I have a mildly positive view on the USD, when it comes to the technical indicators picture. However, situations and moves like the one we faced today make me think this is more of a kids’ game in the mid-long term than I could ever expect.
So, all in all, unless key levels for the USD are broken, that technical picture should hold for now, but one must keep a close eye to the entry levels, because USD bears don’t want to reverse yet their positions and try hard to push the market against the indicators, ironically those which are most used by private investors……
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