Payrolls Support the Dollar

The US nonfarm payroll report showed job contraction by 20,000 jobs(-20k) for the month of April 2008. Unemployment dropped to 5.0 percent.The dollar was strangely supported by these figures because the market expected a much bigger negative number and higher unemployment. The dollar has continued it’s journey back to the north after living in the oversold level for months on end. It is still too early to tell if this is an actual dollar rebound, or rather a retrace to a more normal level of decline. The decision of the fed to make themselves appear neutral has helped the dollar continue to stabilize. If there are any hints towards rate cuts, you can expect an immediate plummet. Despite what seems to be obviously still coming in the financial markets, the rebound in the dollar and the stance of the federal reserve has encouraged risk taking to re-enter the markets. With the exception of the nervousness of the pound pairs, most of the carry currencies have made a roaring comeback and are heading north along with risk taking.The market seems to be becoming complacent again about surprises. Talk has turned back to a shallow recession in the US and even Warren Buffet is calling a bottom to the credit crisis. Normally, I would side with that, but I personally can’t shake the feeling that a final thrust is left that will surprise everyone. Putting that aside, we are just traders and we follow the market and that is what I intend to do.