So, last week Job numbers for the US were released. It was a big announcement. No one can ever really be sure what these figures will turn out to be, but we often have indicators that experts can look to. In this case, the figures came out substantially better than most people thought they would be. Hurray for the US economy! It means that, though job losses continue (number of unemployed still at 9.4% nationwide), the rate of loss is considerably slower. That, in this nasty climate, is good news.
What was interesting was the way the Forex Market – well, the Dollar – reacted to the news. The set up was the same as it has been during this crisis. If the figures are about what people expect, then the current trend of dollar would continue, with no fundamental boost, positive or negative. If the figures were better, then that would be a bullish sign for the economy. That would mean a move away from safety; a move to higher yielding currencies i.e. a move away from the Dollar. If the figures were bad, then the dollar would gain strength. Simple.
Not!! We had really good figures (relatively speaking). I, along with most other traders, looked at our charts expecting losses in the dollar. We instead found a strong dollar. The dollar gained on all the other majors. Also, the dollar gained on the Yen. In the past we have seen that when there are bullish signs, the dollar loses against everyone else but gains against the Yen. When things are bearish, the dollar gains on everyone else but loses against the Yen. One can infer that the Yen is even more of a safety play than the Dollar. So, when the Dollar gains on the Yen AND everyone else, in a substantial move, it is safe to say that it based mostly on Dollar strength.
It is baffling. Suddenly, traders think that bullish signs in the US economy should impact the dollar positively? Why now? Why should there be a shift from the risk trade to fundamental? It is suspicious.
Though the move was major(ish), the trend against the dollar is not broken yet. More will have to happen for the Greenback for the bias to change. In any case, We will have to see what happens this week.