Bullish U.S. Jobs Report Drives Greenback Higher

The EUR/USD broke to its lowest level since August 2012 after the release of a better-than-expected U.S. Non-Farm Payrolls report on Friday. According to the U.S. Labor Department, the U.S. economy added 248,000 jobs in September. Economists had been looking for an increase of at least 215,000 nonfarm jobs. The unemployment rate also fell below 6% for the first time since 2008. The jobs news bolstered the case for the U.S. Federal Reserve to raise interest rates next year.

The GBP/USD was hit on two fronts. Early in the session, the Sterling fell over 1.0% after Market Economic’s Puchasing Managers’ Index of Services contributed to signs that growth in the U.K. is losing momentum. Markit’s services gauge fell to 58.7 from a 10-month high of 60.5 in August. Traders were looking for a decline to 59. After the early session weakness, the British Pound declined even further following the release of the better-than-expected U.S. jobs report.

December Comex Gold futures fell to a new low for the year and is rapidly approaching the December 31, 2013 bottom at $1185.00. After several days of consolidation, the recent selling pressure resumed on the heels of another surge in the U.S. Dollar. The Greenback rose following the release of the U.S. jobs report.

A stronger economy means higher interest rates and higher interest rates makes the U.S. Dollar a more attractive investment. Since gold is dollar-denominated, the higher the dollar rises, the less appealing gold becomes to foreign investors.

After suffering through three days of heavy selling pressure, November crude oil futures rebounded on Thursday. This carried over to early session strength today, but investors couldn’t hold on to the gains, leading fresh intraday weakness.

Despite efforts to form a short-term bottom over the past two weeks, crude oil could not mount a sustainable rally because of the overwhelmingly bearish fundamentals. Overproduction in the U.S., Russia and Saudi Arabia is outstripping demand. According to the U.S. Energy Information Administration, this trend is expected to carry over into 2015.

Over the short run, there may be periods of short-covering rallies primarily driven by geopolitical events, but if left alone to rely on just the normal supply and demand fundamentals, prices are likely to remain under pressure over the long run.