Non-Farm Payrolls printed strong but Dollar struggled to benefit on Friday

On Friday everybody’s attention has been on the release of the Non-Farm Payrolls employment report from the US and rightly so as this report might be one of the most significant piece of news of the year. Obviously this is due to the fact that the Fed waited for the figures to confirm their intention to raise rates this year and we believe that they can now go ahead without any doubts.

The employment figures beat expectations and printed even better than expected confirming the robust performance of the labor market in the States and almost forcing Fed’s hand to pull the trigger on their monetary policy meeting. What is worth discussing though is the reaction of the Dollar after the report hit the wires.

The US currency barely posted any gains against its peers ending the day pretty much around the same levels versus the Euro and the Pound. This is a reaction worth analyzing and keeping an eye on it as the week begins as it can reveal quite a lot about the state of the market and traders’ intentions.

One might suggest that the Dollar is so overbought that traders simply have already loaded their Dollar positions hence no need to add to them. We’re not so sure about this especially after the rally on the back of the ECB event last Thursday so we will be keeping an eye on Dollar’s performance pre-FOMC and we’ll be talking a lot more about it during this week.

Taking a look at the price action during the last 24 hours of last week we see enough volatility in the major currencies but a lack of direction after the release of the NFP figures. The Euro traded around the 1.0900 area swinging higher and lower around this level staying inside a 100 pip range between the 1.0850 and 1.0950 levels. The Single currency rallied after the ECB meeting last Thursday and we are now very interested to see how it will trade given that key ECB officials came out to say that the markets got the meeting’s message wrong. With the Fed ready to raise rates and the ECB poised to talk down the currency it will be very interesting to keep an eye on it.

The Cable had a similar day in terms of price action on Friday and traded either side of the 1.5100 level during the last day of the week. The UK currency was boosted higher from the rising Euro but in a smaller degree. With the Industrial and Manufacturing Production reports pending for release tomorrow we should expect the Cable to pick up some pace pretty soon exiting its current consolidation pattern around the 1.5100 area.