The USD this week

I think the beating the dollar took on Friday was unwarranted.  The reason was mainly due to the Nonfarm payrolls showing a less than expected increase of 108,000.  If traders were to just see this number in the report, I can understand their need to short the USD.  But the other important number was the revision of the November number to 305,000.   This was a revision of 90K.  So if you take this 90K and figure this into the 2 month average (Nov/Dec), you get an average increase of 206,500.   According to the unrevised November figure and what analysts were expecting in December, a two-month average expected was 207,500.

In addition, I think using November and December for determining future job growth is short sighted.  Yes, the retail industry does more hiring during the months of November and December but for other industries, more hiring occurs during the new year once budgets are solidified.

Looking at the EUR/USD, the pair was pushed up to the Daily 200 EMA.  On the weekly, the pair has hit resistance at the 100 EMA.   The USD/CHF shows similar behavior. 

I think these levels were hit a lot quicker than expected in 2006.  The technicals were showing that these levels would be hit in the next 3 months but not before a retrace.   Now this is strictly my opinion but I really see a retrace this week for the USD.  I’ll probably go long on the USD with stops above/below the key EMA.  I wouldn’t expect more than a .382 or .500 fibonacci retrace before consolidation.

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