No doubt the jobs data disappointed and the market positioning was clearly leaning the wrong way. That the dollar has dropped is not that surprising--we thought that was the risk regardless of the data--but rather the greenback's resiliency the far. The euro has not risen above yesterday's high $1.4450 and this is an important level that needs to be taken out to boost confidence that a low is in place. Sterling, for its part, has risen through yesterday's high, but stopped dead in its tracks at the 200 day moving average ~$1.6113. The yen is moving to a different beat, given the stepped up jawboning. A break of JPY92.00 would warned that the yen's sell-off that began in late November may be over.
The key issue for many fx participants is whether January will be a continuation of the December move or a reversal. We have favored the reversal story, thinking that much of December was about year end position adjusting and momentum players jumping aboard. The jobs data is spurring a pullback in US yields, including reducing odds of a Fed hike in Q3. While we expect this to continue and to undermine the dollar, thus far we recognize the jury is still out.
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Reviewed by magonomics
on
January 08, 2010
Rating:
