USD Reaction to Jobless Report

Written by Research | 06 November 2009

JOBLESS RATES RISES

As the US dollar Index reacted to the recent report; tested the 75.64 low and may try to attempt the 74.90 support price. However, such attempt may be limited due to the closing of the week's trading and could only spill over to next coming week's trading session in Asia.

This report carries more weight than the previous once but the movement may have already been anticipated by the traders as some have expected the negative outcome earlier during the week prompting the dollar's lower direction since the satrt of the month.

The Labor Department's report shows that the jobless rate rose to 10.2 percent, which was the highest since April of 1983, from 9.8 percent in September. The business sectors total loss or a net loss of 190,000 jobs in October, less than the downward revission of 219,000 lost in September. But this was more than what the  economists have expected.

The actual rise in the jobless rate can only reflect a sharp increase in the overall unemployed American workers, which rose to 15.7 million from 15.1 million. The net loss of jobs occurred across most industries, from manufacturing and construction to retail and financial. This is based on a separate survey of businesses. The unemployment rate could climb as high as 10.5 percent next year because employers remain reluctant to hire even as there may be signs of a recovery, but not on revenue growth on their businesses and bottom line.

Moreover, the GBP/USD direction reacted swiftly after the report which was working on the price level of 1.6516 corrective low and is currently back up to 1.6575 as of this writing. It just shows the continued strength of the Pound and the Euro on a vulnerable US Dollar still bias on the negative front as traders are reluctant to build fresh positions on the US dollar only because it is oversold levels.

Meanwhile, the USD/JPY reamined lower as the Yen gained stregth in vlaue bersus the US Dollar. Currently priced at 90.07 from a low of 89.77; although the previous low of 87.10 again maybe attempted in the coming week of the Aisan session.

The USD/CHF was still at the 1.0145-50 while it tries to approach the 1.0126 session low in the European session. The Aussie has continued it supward momentum at .9193 which may now surpass the .9329 the week of Oct. 18 2009 if and when the volumes and carry over trades increase as the RBA continues to raise its interest rates till the end of the year to four  (4.00%). The Kiwi has followed suit in this relationship but expect some cross hedge between the AUD/NZD and JPY combination. This has been the play for most arbitraray hedgers on the institutional side where they dfind favorable positions on the trades.