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Demand for higher risk assets helped drive up foreign currencies, commodities and equities on Friday after the U.S. government reported that the economy added 163,000 jobs. This number beat pre-report estimates of 100,000. It can also be perceived as a good sign that perhaps the economy is better than though following three months of sluggishness. The Labor Department also added that the unemployment rate rose to 8.3 percent from 8.2 percent in June.
While the jobs number is encouraging, this year’s hiring pace is roughly the same as last year’s pace of 151,000 jobs a month. The bad news is that this pace is too slow to accommodate the 12.8 million Americans still out of work.
Despite some of the negatives in the report, investors used the better-than-expected number as an excuse to sell the U.S. Dollar and Treasuries to aggressively buy higher-yielding assets. The Greenback was under pressure despite the better outlook on hiring. Additionally, some traders now feel that the Federal Reserve will refrain from adding additional stimulus since the jobs number reflects some underlying strength in the economy.
The weaker dollar is helping the Euro to recover most of Thursday’s losses. Earlier in the week, European Central Bank President Mario Draghi weakened the EUR/USD when he failed to announce decisive plans to help lower interest rates in the Euro Zone. Today’s recovery doesn’t mean the situation has improved in Europe, but rather represents optimism about an improving global economy.
Technically the Euro is trading better than the mid-point of its two week range. Last week’s bottom at 1.2042 is still intact. Yesterday the market topped at 1.2404. The main trend is down on all of the charts, but the daily chart is being to show signs of a support base.
The GBP/USD is also benefiting from the weaker dollar, following yesterday’s sell-off. On Thursday, the British Pound broke in sympathy with the Euro and on the news that the Bank of England was refraining from additional stimulus at this time.
Technically, two key bottoms at 1.5458 and 1.5392 proved to be solid support the past two days, giving the Sterling a slight bias to the upside. Unless it can overcome the two tops at 1.5767 and 1.5777, it may remain range bound over the near-term.
December Gold is trading higher today. Last week’s breakout rally has lost its momentum, but the main trend is still up. Today’s rally is being driven by the weaker dollar. The short-term range is $1566.80 to $1633.30. Today the market rallied after establishing support in a retracement zone at $1600.05 to $1592.20. If the U.S. Dollar remains weak then look for gold to make another run at the upside.
September Crude Oil is also benefiting from the weaker dollar. On Thursday the market was challenging a former bottom at $86.84. Today the market is pulling away from this level to the upside. A breakout over $90.95 could trigger an acceleration to the upside with $93.25 the next target. Fundamentally, the abundance of supply remains an issue, but today’s friendly jobs data could be an indication of an improving economy and consequently greater demand for crude oil.