EUR/USD Rally Stalls on U.S. Jobs Data The Labor Department said Non-Farm Payrolls rose by 175,000 in May, up from April’s pace and exceeding the consensus forecast by economists of 164,000. The unemployment rate edged up to 7.6% from 7.5% as more people entered the workforce. The U.S. Dollar may have risen on the news on the perception the job growth was strong enough to warrant a change in Fed policy. For a little over a month the threat of the Fed tapering its aggressive asset buying program has driven up U.S. interest rates, giving the Greenback a boost because of investment demand. Another reason for the rise may be that the dollar was just too oversold. The report froze the EUR/USD which had posted a strong rise on Thursday from 1.3074 to 1.3305. Although the move in the dollar turned the Euro negative for the day, it did not change the trend to down but merely produced an inside range. Technically, the EUR/USD may also be overbought, setting up this Forex pair for a potential short-term break next week. The strong U.S. Dollar also stopped the rally in the British Pound. This market had posted a quick 6-day rally from 1.5007 to 1.5683, but may be overbought on a daily basis. It is possible that uncertainty over U.S. interest rates and Fed policy could encourage additional selling pressure next week especially if traders start to believe that a cut in the aggressive asset by the Fed is nearing an end. After failing a number of times to breakout above a retracement zone at $1413.25 to $1431.01, August gold turned south, triggering a break of over $30.00. The stronger dollar helped pressure this market because it made gold more expensive to foreign traders. Some feel that today’s report actually lifted the air of uncertainty that had been holding gold prices up, leading long speculators to liquidate their positions when the jobs data came out in line with expectations. July crude oil traders actually liked the jobs number, choosing to take the market higher on the thought that new hires meant the economy was improving. Overall, the oversupply situation could put a lid on this rally, but speculators may be pricing in the possibility that a strengthening economy will lead to increase demand. Technically, the market crossed over to the bullish side of a retracement zone at $94.31 to $95.03, but the real test will come when the market comes within striking distance of the three main tops at $97.35, $97.38 and $98.22. If the market is truly range bound, fresh selling pressure should re-emerge.
Posted on: Mon, 10 Jun 2013 03:05:01 +0000