NFP surprises

The jobs numbers came in better than expected, which is contrary to what was expected after the ADP report earlier this week.

This has re-ignited some risk-on trades, like the AUD and to some degree gold and silver. But the Euro has not moved much and the dollar index remains pegged at the 74 high it shot up to yesterday.

It seems there are two prevailing beliefs about what happens next:

1. The dollar weakens again early next week and then moves down through its all-time low of 70.7, causing the precious metals to explode.

2. The Euro bounces but sets a lower high and the dollar reversal takes off, causing a bunch of consolidation and correction over the next couple of months.

To support 1, here is a story pointing out the long-term strength of the Euro:

http://www.dailyfx.com/forex/fundamental/us_dollar_index/daily_dollar/2011/05/06/U.S._Dollar_Index_Halts_Three-Day_Advance_Major_Trends_Remain_In_Tact.html?utm_source=twitterfeed&utm_medium=twitter

To support 2, here is another story from the same site pointing out the change in trend of EURUSD:

http://www.dailyfx.com/technical_analysis/elliott_wave/

If the first scenario unfolds, there will be some signs, but the explosion part could be very fast, kind of like the decline this week.

Either way, there will be a bounce soon. Certainly the positive news in the NFP report has put a base under the risk aversion that swept through everything this week.

This entry was posted on 06/05/2011 at 05:07 pm and is filed under Gold, Dollar Collapse. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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