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03/09/2008 - Friday’s price action may signal a short-term bottom for the USD

Posted by FOREX.com's Weekly Strategy in March 7th 2008  
* Friday's price action may signal a short-term bottom for the USD
* Oil prices and US slowdown will spill over into slower global growth
* Fed increases lending to banks, but credit markets still jammed
* Key data and events to watch for next week

The USD continued to decline for most of the week, buffeted by weakness in the ADP national employment report and a downbeat Beige Book, with a hawkish ECB thrown on top for good measure. Friday's NFP report vindicated the weakness seen in the ADP report, for a change, and offers further evidence that the US economy is contracting at the moment. But the price reaction of the USD after the jobs report was significant and may signal a short-term bottom for the greenback. It's next to impossible to construct a fundamental argument over why the USD should recover, which leaves market technicals and positioning as the only potential source of a recovery. After the weak February NFP report (-63K jobs lost; unemployment rate fell from 4.9% to 4.8% on frustrated job seekers dropping out of the labor pool), the USD's initial reaction was a quick drop, but the weakness did not last long. The USD had been heavily sold earlier in the week in anticipation of just such a weak NFP report, and once it materialized, profit-taking buying of USD emerged.  Full text »

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Filed under: Weekly Strategy