Alpesh Patel
InvestingBetter.com
General market theme
The Non-Farm Payrolls report was the focus at the end of last week and investors were very keen on finding out how the domestic labor market was fairing in the US. We have warned our audience on the possibility that the numbers of jobs added in the US economy could surprise to the downside dragging the Dollar lower with it. However was surprised us was the rest of the components of the report that printed in favor of the US currency and allowed it to remain afloat.
The absolute number of people that entered the labor market did surprise lower on Friday however the unemployment rate fell even further and at the same time we noticed a very healthy wage growth rate. These two components changed the outlook of the report and traders remained hopeful that the Fed will not turn too bearish this week allowing the Dollar to recover from its recent losses.
Price action highlights
The US Dollar was the currency in focus on Friday and the US currency posted gains against its peers across the board on the back of the bullish NFP reading. The Euro came off its 1.1200 highs and dropped to the 1.1100 area after the figures hit the wires and since the Asian opening the currency is trading below the 1.1150 level. It will be interesting to see how traders will react to the NFP strength this week, the most likely scenario is that they will remain cautious ahead of Wednesday’s testimony from Janet Yellen on the state of the economy.
The Cable rallied lower on Friday extending its losses from earlier in the week, the Dollar strength drove the UK currency to the 1.4500 area after the NFP reading but the 1.4450 level provided some support for the time being. The Cable has reversed its rally that drove it to the 1.4650+ highs but for it to turn to a bearish rally to the downside more momentum is needed.
Focus of the day
We expect limited volatility today as the economic calendar is empty of any news of increased importance. Traders will follow up on their moves after the NFP report provided some support to the US Dollar but as we mentioned above the key here is to see whether the better than expected employment report will allow Fed’s Yellen to appear less bearish than feared on Wednesday.
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