Forex Trading - Market Update

The Non-Farm Payroll (NFP) numbers came in better then expected today. Actual: 171, Est: 123, Previous: 114 (revised up to 148). The dollar initially strengthened on the news against the Euro and Pound; but slipped against the commodity currencies. However, as the day went on the dollar gained across the board. The Wall Street Journal Dollar Index closed up 0.654% on the day. The Canadian dollar was the strongest currency of the majors - even appreciating against the dollar on the day. (A post on trading the $C is coming soon.)

Strongest to Weakest
CAD
USD
NZD
AUD
GBP
EUR

The Aussie was the weakest of the 3 major commodity currencies in part due to the miss on PPI overnight (Actual: 0.6%, Est: 1.0%, Previous 0.5%). A lower than expected PPI number increases the chance of a future interest rate cut. This number is reported quarterly and I believe the miss was large enough to be significant - especially considering that one of the catalysts for the recent uptrend on the hourly chart was the CPI number beating expectations by 0.5% on 10/23.

Interestingly, the commodity currencies were holding up well through the day until AAPL snapped below it's 200 day moving average and dropped steadily after that (it closed down 3.31%.) The equity markets picked up downward momentum as soon as Apple broke the 200 MA, and we saw commodity currencies follow the equity markets down (20-25 pips across the board.) We heard a lot of speculation that the USD strength and the fall in equities today was attributed to the positive US employment data having a negative impact on expectations of future Quantitative Easing. I agree with that opinion, but I think the uncertainty over who the next president will be is also having a big impact. Once that is decided, there are a lot less possible scenarios that investors have to worry about. (i.e. if Obama wins, than Bernanke will most likely not be replaced.)

I think that we are largely in a "wait and see" mode until the results of the presidential election come in, but I favor playing into USD strength until then especially in the upcoming Asian and European sessions. Remember - the major move down today in US equity markets happened after Europe closed, so most traders in Europe and Asia haven't reacted to the moves yet.