Jobs Report Weighs on Dollar
Fundamentals
The Dollar is sharply lower against the majors this morning, ahead of the non-farm payroll data from the government. The consensus opinion suggests the economy lost 650,000 jobs in February, but it would not at all be surprising to see the figure come in closer to 700,000. The unemployment rate is expected to rise to 7.9 percent. The US economy's slide has not yet shown signs of reaching a bottom and it is conceivable that the unemployment rate could reach 9.5 or even 10 percent before the economy finally does bottom out. Given the doom and gloom surrounding the state of the US financial sector and economy, it is somewhat astounding that the greenback remains near multi-year highs first reached in November. The Dollar's strengths have been the weakness of other nations and its status as the world "reserve currency." It speaks volumes about how back conditions are in Europe and Asia at the present moment. Japanese economic data has been much worse than expected, with the economy shrinking at an annualized rate of almost 13 percent last quarter. Several key commodities, including Copper and Crude Oil, have shown signs of life recently and that does not bode well for the Eurozone and Japan, who do not produce either raw material. Given the fact that Japan would like to see their currency continue to drop in value, the Dollar Index may continue to climb, despite the adverse economic climate. The question that remains is whether or not the currency will be able to hold up if the face of rising debt.
Technicals
The March Dollar Index remains in an uptrend on the daily chart. The fact that the market pulled back after making a new contract high close yesterday has to be somewhat discouraging for the bull camp. Prices may come back down to test the uptrend line. If the market is unable to hold the trendline, prices could fall back to the mid-to-low .8000's. The bull camp would get a huge boost from new contract highs north of the .9000 level, which can be seen as both technical and psychological resistance. Momentum remains flat despite the sell-off this morning, which can be seen as somewhat positive.
Rob Kurzatkowski, Senior Commodity Analyst
