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Overall: In a reversal of what we have seen lately, positive economic news spurred traders to buy the dollar as better than expected non-farm payrolls led traders to speculate it would be the U.S. that leads the global economy out of the recession. The dollar strengthened against all of the other major currencies, gaining the most against the euro since April and hitting the highest level against the Japanese yen in three weeks. Speculation is starting to gain strength that the Federal Reserve will increase interest rates by the end of the year. Contracts show a 66% chance of such a move. The outlook for the dollar remains to the downside but maybe the recent weakness in the greenback has been overdone and a slight correction may be coming into play.

The release of the non-farm payrolls this morning showed that the U.S. cut fewer jobs than expected, a possible sign that the recession is on the verge of bottoming. Payrolls dropped 345,000, the least amount of jobs cut in eight months. April’s number was revised lower to 504,000. However, the jobless rate climbed to 9.4%, the highest rate since 1983. U.S. consumer borrowing dropped by $15.7 billion in April, the second biggest decline on record, not really surprising since unemployment continues to rise. The U.S. has lost six million jobs since the recession started in December 2007.

The Euro (Eur/Usd) The euro fell dramatically on Friday as the dollar strengthened across the board after the better than expected non-farm payrolls release. The pair fell 200 pips, on the day, closing near the 1.3970 level. The pair has been on a bull run since the end of April and continues to be supported by the 20 day simple moving average.
 
The Pound (Gbp/Usd) Cable dropped for the third day in a row on Friday as the dollar strengthened across the board on the heels of the jobs data, which beat expectations. Political tensions in the U.K. were a factor in the pound weakening overnight and the pair pushed lower during the U.S. session. Despite Friday’s movement, the pair remains above the closest major simple moving average, the 20 day.

The Aussie (Aud/Usd) The aussie moved lower as the dollar strengthened, equity markets had difficulty maintaining momentum and gold prices dropped significantly. Better than expected non-farms payroll data strengthened the dollar as traders speculated that the U.S. will lead the global economy out of the recession. The pair lost approximately 70 pips on the day after trading in a range of 200+ pips and closed near 0.7930 just off the lows of the day.

The Cad (Usd/Cad) The dollar strengthened against its Canadian counterpart as the greenback strengthened across the board and oil prices dropped after moving above $70 a barrel. The pair gained almost 200 pips on the day, but lacked the strength to break above the 20 day simple moving average. The Canadian economy lost a higher than expected 41,800 jobs while the unemployment rate jumped to 8.4%, higher than the expected 8.2%.

The Swissy (Usd/Chf) The swissy gained 165 pips and tested the 20 day simple moving average intra-day, as the greenback strengthened in the broad market after the release of the non-farm payrolls report which showed U.S. employers shed 345,000 jobs, much less than the 520,000 expected. Swiss CPI came in in-line with expectations at 0.2%, lower than the previous read of 0.9%.

The Yen (Usd/Jpy) The dollar strengthened against the Japanese yen as speculation continues to grow that the Federal Reserve will raise interest rates by the end of the year. The pair moved significantly higher on Friday, gaining approximately 220 pips, closing near 98.80, the highest close since May 7th. The pair managed to break above the 50 and 100 day simple moving averages and closed the day trading above all of the major daily SMA’s.