General market theme
The focus of the day on Friday was the Non-Farm Payrolls report that was expected to show a mild improvement in the US labor market consistent with the mixed figures coming out of the economy in recent weeks. However to everyone’s surprise the report printed in a strongly bullish manner with the number of jobs added coming in much higher than expected and with equally impressive performance across the other metrics like wage growth and worker participation. The report breathed new life into the dollar and as a result the US currency gained across the board as traders are again contemplating whether a rate hike is still on the table for 2016. We believe that this remains to be seen but on the short-term the dollar is bound to get a confidence boost against the rest of the major currencies.
Price action highlights
The euro dropped lower on Friday as the NFP figures surprised to the upside and the EU currency fell from the 1.1150 area to trade as low as the 1.1050 level on the back of the report. The US labor market figures caught traders by surprise hence the reaction in the euro which managed to correct higher overnight and this morning is trading around the 1.1100 figure and we now need to see whether the dollar will extend its gains during the week ahead. There’s little in terms of fresh news today so we might see limited price action with the US dollar testing euro’s lows around the 1.1050 area for the time being.
The cable was bearish on the back of the NFP report and the UK currency lost even more ground during the last session of the week. The pound has been weak on the back of the BoE decision to lower interest rates and the bullish NFP figures dragged the currency even lower to trade below the 1.3200 support and as low as the 1.3020 level. The bias is bearish of course for the pound on the back of BoE decision and the NFP report however it remains to be seen whether more losses are ahead or the oversold pound is nearing a bottom. For the day ahead we expect another test of Friday’s lows but we’re not sure we could see a further continuation lower than that.
Focus of the day
The economic calendar is really barren today with only the Eurozone Investor Confidence report pending for release this morning but the report is not expected to affect the price action at all. The German Industrial Production level just printed slightly better than expected but with little fresh news we expect limited price action during the first session of the week.
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