Better than feared, but worse than expected is good enough for the Dollar

Monday, April 6, 2009


The US Non-Farms Payroll on Friday showed a higher than expected, but less than feared number of newly unemployed Americans. The 663,000 was more than the 650,000 that was expected and less than the 700,000 that was anticipated. For the American economy, this number was significant because it showed that the rate of unemployment was flat, not growing, which led many to believe that a bottom to the downturn is near. Coupled with better than expected data in housing and auto sales earlier in the week, and surprising earnings reports from some major companies, sentiment towards the US economy, and by default the dollar, was up.

At the close on Friday, the dollar closed up .1% to the Japanese Yen to 100.1 after hitting 100.37, a five month high. The dollar fell to the Euro slightly to close at 1.3483, up .21% to the Canadian Dollar to 1.2297 and up .04% to the Australian Dollar to .7151. The dollar also fell .2% to the Swiss Franc to 1.1297 and was unchanged versus the New Zealand Dollar to close at .5857.


Data released in Britain on Friday showed a slowing rate of contraction in the services sector which helped boost interest in the Pound. The Chartered Institute of Purchasing and Supply, which conducts the PMI survey, said that March showed a higher than expected rate of growth, coming in at 45.5 which was higher than expected 43.5 and February's 43.2. This coming week will be a telling one for the Sterling as Manufacturing indicators will be released on Tuesday and Thursday and the Bank of England meets to discuss interest rates.

The Sterling closed up .3% to the USD to 1.484, above the psychological 1.48 level which it has struggled breaking for a while. The Pound also rose more than 1% versus the Euro to close at .9084, and was up .35% to the Swiss Franc to 1.6766. The Pound also finished a good week against the Yen, which currency did not, closing up more than 1/4% to 148.32.

Chart Analysis: EURGBP

EURGBP is at a very important inflection point here just after the ECB announcement and ahead of the ECB press conference, having broken initial 0.9150 support and now taking aim at the 55-day moving average and the rising trendline, not to mention the key 0.9000 pivot area. A move through there could help set up a structural top and a new down trend. Stay tuned.

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