Post Job Thoughts

No doubt the jobs data disappointed and the market positioning was clearly leaning the wrong way. That the dollar has dropped is not that surprising--we thought that was the risk regardless of the data--but rather the greenback's resiliency the far. The euro has not risen above yesterday's high $1.4450 and this is an important level that needs to be taken out to boost confidence that a low is in place. Sterling, for its part, has risen through yesterday's high, but stopped dead in its tracks at the 200 day moving average ~$1.6113. The yen is moving to a different beat, given the stepped up jawboning. A break of JPY92.00 would warned that the yen's sell-off that began in late November may be over.

The key issue for many fx participants is whether January will be a continuation of the December move or a reversal. We have favored the reversal story, thinking that much of December was about year end position adjusting and momentum players jumping aboard. The jobs data is spurring a pullback in US yields, including reducing odds of a Fed hike in Q3. While we expect this to continue and to undermine the dollar, thus far we recognize the jury is still out.
Post Job Thoughts Post Job Thoughts Reviewed by magonomics on January 08, 2010 Rating: 5
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