The natural question today is has EUR/USD finally put in a top? The answer: Too early to say.
Sure, that sounds weasily, but its the truth. We really have to break back below the uptrend in place for nearly a month now drawn off 1.2640, located now around 1.3785 and rising 2 pips ah hour.
Even then, we can’t be one hundred percent sure (see AUD/USD from Wednesday of this week…)
I will be keying in on tomorrow’s unemployment report. Should we get a poor employment report (consensus nonfarm payrolls unchanged, private sector jobs up 75,000, unemployment rate up 0.1% to 9.7%) . If the number is near or worse than expectations and EUR/USD does not rally, we can conclude that the QE story has become played out.
Stronger data will lead to a natural USD rebound, EUR selloff but it is very unlikely that employment will improve enough to materially change the Fed’s view that the economy is growing too slowly to create jobs are boost inflation back toward its target.
One thing to beware of is the outlier employment report; that rogue wave of data that occasionally hits the market out of the blue. Occasionally you will get big pops in the figures. In 1994 we had a 468,000 gain coming out of the early 90s recession. In 2005 we had a 350,000 month coming out of the dotcom/9-11/Iraq invasion recession. Just this spring we added 430,000 jobs (many of them census workers)…
Also we get the benchmark revision tomorrow, adjusting the data for the prior six months…Lots of moving parts, to be sure.
