Dollar too expensive, Wall Street buyers advantage

The US labor market report weakened the USD and caused buyers on Wall Street to dominate. The data was solid, but negative signs of cooling prevailed. Perhaps the USD is too much "bought up" and there is no more strength for further appreciation - at least in the medium term. Falls EUR / USD after the decision FOMC last Wednesday they were fully made up. The main currency pair approached parity.

Let us recall that employment in the non-agricultural sector amounted to 261 thousand, which is higher than forecasted at 195 thousand. The September reading was also revised upwards to 315. The increase in the unemployment rate to 3,7% is certainly a negative factor. or a decrease in the economic activity rate to 62,2 percent. from 62,3% previously.

Non Farm Payrolls

Friday's employment data confirm the picture from the last few months. Although the labor market is moving in the direction desired by the Fed, the slowdown is still very slow. The start of the fourth quarter has been quite positive for the US economy so far. Along with some other hard October figures that have already been released, labor market data continues to point to continued good economic conditions.

The result desired by the Fed - prolonged economic growth below the long-term trend - has not yet been achieved. Further interest rate hikes should be expected, even if according to the Fed they will probably be lower than the recently taken steps by 75 basis points.

There are data on inflation ahead of us

This week we will get the US inflation data will certainly affect volatility. Friday events on FX market and the stock market overseas, show that the rebound could be even greater. If CPI falls below expectations (forecasts indicate 8%), then we can expect the continuation of the USD sell-off.

The market will be more sensitive to data showing a stronger decline in price growth. If Thursday's release is below the assumed values, then we can quickly find ourselves in the main currency pair close to 1,0090 and then 1,0180 - where the September peak is located.

Source: Łukasz Zembik, OANDA TMS Brokers