Dollar Retreats On US Jobs Data
The dollar fell against the major currencies on Friday as the disappointing US labor market data indicated that the economy is going into a recession. The long waited Non-farm payrolls report showed a drop in the jobs by 240 000 in October, which pushed the unemployment rate higher to 6.5% - its biggest level since 1994. In addition to the negative picture, Pending home sales declined by 4.6% in September, while the consensus was -3.5%. The weak data strengthen the speculations that the Federal Reserve will cut the interest rate again on its next meeting. The interest rate futures point 99% chance of 50 bp reduction in December, compared to the 55% odds a week ago. Despite that analysts are convicted that the uncertainty around the global economy will support the US currency in the mid-term. The euro rose against the dollar to $1.2760, while the sterling advanced to $1.5673. The recovery of the global equity markets on Friday brought the risk appetite back, which put pressure on the yen. The dollar rose against the Japanese currency to 98.23 yen, while the euro added 1% to 125.35 yen.
EUR/USD
The short term picture remains neutral as the euro continues to consolidate near the resistance level at 1.3110. If broken successfully, next target will be the resistance at 1.3320, which is 61.8% retracement of the 1.1640-1.6035 rise, followed by 1.3680. A successful break of 1.3320 will give us a signal that the positive mid-term trend is resumed, otherwise the negative risk remains and we may witness new declines. On the downside support is seen at 1.2500, followed by 1.2340 and the psychological 1.2000.
EUR/USD (chart, table)
USD/JPY
The short term picture remains neutral as the pair consolidates in a narrow range around the level at 98.70, which is 23.6% retracement of the 124.12-90.90 drop. On the upside resistance is seen at 100.55, followed by the key level at 103.50, which is 38.2% retracement of the mentioned drop, and 105.60. A successful break of 103.50 will give us a signal that the mid-term uptrend has resumed, otherwise the negative risk remains and we may witness new declines.. On the downside support is seen at 95.75, followed by 90.85 and 85.00.
USD/JPY (chart, table)
GBP/USD
The short term picture remains negative but so far the downward movement is limited by the support level at 1.5540. If broken successfully next targets will be the supports at 1.5420 and 1.5270. On the upside resistance is seen at 1.6650, which is 23.6% retracement of the 2.1150-1.5266 drop. If broken successfully, next targets will be 1.6900 and the key level at 1.7510, which is 38.2% Fibo retracement. The downside risk remains, as far as, the pair stays below 1.7510, and its overcoming will give us a signal the mid-term positive trend has resumed.
GBP/USD (chart, table)
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10.11.2008 FX daily review.pdf, 600 Kb
