Saturday November 6, 2010 - 02:33:30 GMT
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Greenback Down for Week but Jobs Data Offers Ray of Light
The U.S. Dollar finished lower for the week, but a rally on
Friday helped offer a ray of light for the Greenback.
The U.S. Dollar strengthened against most major currencies
after the government said the non-farm payrolls grew by 151,000 in October,
exceeding pre-market guesses. The Labor Department also revised upward payrolls
for August and September. The strong showing helped keep Octoberâ€™s unemployment
rate 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 and
British Pound which suffered big losses. The fresh employment data helped give
risky assets a boost, driving up demand for commodity sensitive currencies such
as 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 remains
below a swing top and downtrending Gann angle which indicates continued
pressure until the market can penetrate either one of these resistance points.
The inability to produce a weekly closing price reversal this week leaves this
market vulnerable for a new low next week. If this occurs early in the week, then
bullish traders may attempt to produce a weekly reversal once again.
Getting back to the jobs data, the economy needs to be
creating at least 250,000 jobs or more to get back on track. Even though the
Fed pledged $900 billion in quantitative easing earlier in the week, this
doesnâ€™t mean that employers will start hiring. Employers are waiting for
consumers to step up their game before they will start bringing in new workers.
Technical signs are building in the USD JPY which indicates
impending volatility. Overnight the Japanese Yen had very little reaction to
the Bank of Japanâ€™s decision to hold interest rates unchanged and the release
of details of its recent liquidity-injection campaign.
The Euro was down sharply on Friday but held on to its
weekly gains. Based on the short-term swing of 1.3733 to 1.4282, traders should
watch for a pull-back to 1.4008 to 1.3943.
The GBP USD reversed Thursdayâ€™s rally. At the close this
market was approaching an uptrending Gann angle at 1.6130. A failure to hold
this level could trigger an acceleration to the downside with a potential
target zone at 1.5974 to 1.5897. This zone represents 50%/.618 retracement of
the 1.5650 to 1.6298 range.
Fridayâ€™s strength in the Dollar appears to have shifted
interest away from the Fedâ€™s quantitative easing action from earlier in the
week and back onto the economic fundamentals. This may be only a temporary
condition as most traders should realize that the employment news is only a one
day event so far. One key to sustaining the strength in the Dollar will be
whether the jobs data can begin to form an upward trend.
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