The US Unemployment Report showed stronger job from a Non Farm Payroll and Private Payroll perspective with the Private job growth showing the highest gain since February 2006. The Unemployment rate, however, upticked to the psychological 9% level. I don’t know what it is but if it was 8.9% instead of 9%, what a diffference it would have made to consumer confidence. The 9% will not look good in the business press tomorrow or on the Sunday talk shows.
The dollar rallied initially but then lost some of its luster as the longs seem content to cover some positions going into the weekend.
Against the EURUSD , the price held channel trendline support (see chart below) soon after the report release and bounced higher. The level is still in play and a move below either today or next week keeps the corrective move in place that could see the price move to the 1.4150 level over the longer term. The move in the first 4 months of the year took the pair from 1.28 to 1.49. The catalyst was higher Euro rates, steady US rates. Yesterday’s Trichets more sanguine comments opened the door the correction lower. There is room to roam to the downside given the sharp trend move higher. Damage was done yesterday that could lead to a larger corrective phase over the next few weeks.
The GBPUSD fell below neckline support (head and shoulder formation in the chart below). Staying below the neckline trendline would be the most beneficial development for further downside momentum. What would also be supportive if commodities can continue correction and the speculation squeezed out of the market. This should ease headline inflation in the UK and justify the BOE “no change” policy. Like the EURUSD, the GBPUSD has moved sharply higher in 2011. At the end of December the low was 1.5343. The high reached 1.6744. A move toward 1.6209 is possible for the pair…if the bearish technicals can remain.