Non-Farm Payrolls came in above expectations but the positive jobs report was not enough to reverse the change in market sentiment that began yesterday. The ‘risk-off’ theme continued with the dollar significantly stronger and the euro sold across the board. Commodities fared better today, the lone exception being crude oil.
Despite a strong payrolls report the dollar buying continued for the second day in a row with the EUR/USD falling to a low of 1.4316 from 1.4540. The remarkable two day decline in the EUR/USD has shed more than 6 cents in the pair. Technical damage has also been done as the pair looks to close below the rising trend line off of the January low. For those looking to enter at a better level, a likely target for a potential entry may be found at 1.4150, the 38.2% Fibonacci retracement from the January to April trend.
The EUR/GBP traded sharply lower by 1.3%, touching a low today of 0.8749 from 0.8871. Today’s low for the pair coincides with the 38.2% Fibonacci retracement from the January low to the yesterday’s high.
Commodities are mixed as both gold and silver look to close near their opening day price while spot crude oil reached as low as $94.67 only to close at $97.55. One explanation for this week’s reversal in commodity prices may be the expected cut off of excess liquidity in June when the Fed’s QE II program is due to cease.
Next week the Fed faces an inflationary conundrum with US inflationary data set to be released. This should test the resolve of the Fed doves as the headline CPI number rose 2.7% in March while the Fed’s preferred measure of inflation pressure core CPI remains subdued at 1.2% y/y.
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Russell Glaser is a Currency Analyst with ForexYard. Russell provides analysis in the FX spot market by employing fundamental research methodologies. In addition to currencies, Russell closely follows the correlation between the Commodities market and the movement of equities. His writings have been published on the ForexYard Trading Blog and associated partner sites. Prior to joining Forexyard, Russell Glaser served as a management consultant in the financial services industry, advising Fortune 100 companies. Russell holds a degree in finance from the Fisher College of Business at The Ohio State University.
