The dollar continues to drop after last week's poor Non Farm Payrolls results, and positive economic news from China is leading to a huge day higher for commodities.
First, a recap of the numbers: (as of 19:00 GMT)
EURUSD : 1.4529 (+122 pips)
GBPUSD : 1.6118 (+93 pips)
AUDUSD : 0.9305 (+61 pips)
USDCAD : 1.0320 (+19 pips)
GOLD : 1153.50 (+ $16.50)
CRUDE OIL : 82.65 (- $0.20)
S&P 500 :1130 (-1.30 points)
Hey, wasn't the dollar already down last week because of the NFP?
What often happens following an NFP release is the market uses the weekend to evaluate the numbers and then begins a sustained move the following week. As such, the initial opinions showed that the weak NFP results will continue to cause inflation worries in the US to persist as further dollar devaluing stimulus could occur. Over the weekend, Forex traders and analysts have also been realizing that any expectations for US FED rate hikes any time soon are overly optimistic, and 2010 will be another year of sustained low yields from the dollar. As a result, the EURUSD hit a high of 1.4555 today, with gold topping out at 1161. Also, since the employment view has caused a negative view of the US economy, US equities have been unable to take advantage of the flight to higher yields and are also trading around unchanged levels.
Looking forward, the moves higher in the euro and yen against the dollar may be muted, as the Eurozone and Japan continue to suffer from their own set of negative economic issues. Also, crude oil which is benefitting from surprising China strength still has inventory oversupply concerns which could cause a large selloff. Nonetheless, we could see another move towards 1200 from gold as inflation worries continue.
One pair to be watching is the AUDUSD. Unlike some of the other commodity currencies, chances of a central bank intervention occurring in the AUD is lower, as its main exports are raw goods which aren't as effected by strengthening the AUD. As such, the AUDUSD has been rallying steadily since hitting December lows of around 87.50. Technical wise, the pair continues to be setting higher highs and higher lows, which indicate buyers have been ready to buy on the dip. At Go Forex we believe there may be further potential for gains in the pair as long as it remains above its uptrend line. However, if gold prices make a sharp move lower, the AUDUSD is susceptible to a multi figure correction if the pair breaks below its trend line.