Weak Jobs Data Reduces the Dollars Attractiveness
The dollar moved lower against most major currencies with the exception of the Canadian dollar which faced even greater issues than the US when it released its employment report on Friday. Yields in the US moved lower as bond prices climbed higher as investors are now grappling with whether the Fed will continue to taper its bond purchase program when it meets later in January.
The immediate response from the weaker than expected non-farm payroll report which produced 74K jobs in December compared to the 200K expected by economists, was to send US Treasuries higher and the dollar lower, against nearly all the major and many emerging markets currencies. The main exception was the Canadian dollar, which was weighed down by its own poor data and the beginning of market speculation that the Bank of Canada may cut interest rates.
The weakest monthly jobs report in a couple of years spurred speculation that the Federal Reserve may postpone the next tapering move. It was expected to be announced at the month-end FOMC meeting, and would have brought the Fed’s asset purchases down to $65 billion a month.
It is unlikely that the Fed will make its decision based on one month’s data point, especially give the colder than normal weather that blanketed the mid-week and east-coast of the US during the sampling period which likely led to a reduction in positive responses. A second disappointing report would probably change the Fed’s view, and could generate trepidation within the capital markes.
The AUDUSD was the best performing currency against the US dollar over the past two trading sessions. The AUDUSD climbed 2 big figures, breaking out above trend line resistance. Momentum is strong with the MACD printing in positive territory with an upward sloping trajectory. The RSI moved higher with price action printing near 57, which is on the upper end of the neutral range.
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