The US Dollar rate enters the new week under continued pressure, following the discouraging employment report released on Friday. The fact that the employment data was on the whole quite weak but not disastrous ended up being the worst possible situation for the Greenback, which most probably would have benefited in a situation where the data was either really bad or really good.

A really bad report would have rehashed the views that weakness in the US is likely to ripple into the global economy, thereby perpetuating the flight to safety trade, while a really strong report would probably have benefited the buck as well, with investors being encouraged by the data and overall prospects for US recovery (translating into higher fed fund futures). In the end, this is not how things played out, and we could be in store for another round of selling US Dollars. Technically, currencies are certainly overextended and warn of the potential for a major corrective pullback in favor of the US Dollar, but at this point, we have received no confirmation of such a reversal.

The Euro now looks like it could extend towards the 1.3500 area, while Us dollars to Japanese Yen still needs to take out critical support by 84.80 below. Cable has finally reached 1.6000 but could now see an overshoot into the 1.6100-1.6300 area before finally stalling out. Meanwhile, US Dollar to Swiss Francs looks poised for a fresh drop towards the 1.0100 figure before considering the possibility of a meaningful base.

The antipodeans have also been quite strong with Australian and New Zealand Dollars residing by fresh multi-day highs. The only currency that has shown any weakness over the past few sessions has been the Canadian Dollar, with the single currency getting whacked in sympathy with the US Dollar exchange rate due to proximity, while also being hit hard on some horrid local data.

Looking ahead to European trade, the German trade balance (12.0B expected) is due at 6:00GMT, followed by Eurozone Sentix investor confidence (1.6 expected) at 8:30GMT. All is quiet on the economic calendar in North America, and markets will like trade off of broader global macro developments. US equity futures are tracking lower in early trade.

For the full story please visit www.dailyfx.com

 

Bye for Now

 

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