High NFP Data Continue to Strengthen the Dollar

High NFP Data Continue to Strengthen the Dollar
February 9, 2015


The entire financial community was stunned as last Friday’s NFP (Non-Farm Payrolls) release beat expectations by a mile.

It was the third consecutive month in which the US economy added jobs in a strong fashion but, more importantly, it did so with an increase in labor participation as well.

Was this a surprise? Many would say yes, but looking at the very definition of the NFP and trying to compare it with the ADP (private payrolls – jobs added by the private sector in the same period of time), one could see that the previous Wednesday ADP release was beating the expectations as well, and the previous month numbers were revised higher as well.

The same happened with the NFP as the December numbers were revised higher as well.

The reaction all over the dashboard was a staggering US dollar jump against virtually anything and especially a higher USDJPY rate.

The reason for the USDJPY reaction comes from the fact that it is directly linked to what is happening on the jobs market in the United States and from the fact that lately, to be more exact, since the pair made the trip above 121, it is just consolidating in a contracting triangle. Like any contracting triangle, it needs to break when consolidation is over and, last Friday, the triangle broke higher. Such powerful was the move as after the NFP it closed two big figures above the pre-NFP level.

Going into next week and the same should be expected with levels above the 120 area and with new highs to be made.

However, I would be cautious when trading above the 122 level as sellers should jump in. Elliott Waves theory suggests a five waves structure should complete with a new high and, yet again, consolidation to come.

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Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world

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