The NFP has made its impact… It may have been against my expectations, but the break above the 98.33 high in the dollar index was the final straw that broke the camel’s back. It also broke my expectation of a dollar cycle low in early December and appears to have provoked the resumption of the major dollar rally. It was always going to happen, but that it developed earlier than I had expected is a bitter pill to swallow.
So should we be piling on the bullish dollar positions? Well, I’m not convinced at this stage, following the dramatic effect of the NFP, that there’s not much room on the upside to go before a correction. The bigger issue is how deep will the correction bite? That we can only judge when it happens.
For today, we should see follow-through from Friday’s announcement but most likely with slower momentum that should begin to see the market absorb the break higher to then adjust their outlook – and positions - as we move into the last few weeks of the year. From the structures across most currency pairs and the reluctance to maintain large positions going into thinning liquidity, it is going to imply a hefty pullback at some point. In particular this tends to set USD/JPY apart from the Europeans and could generate a reversal into the early December cycle low…
The only pair I am puzzled by is AUD/USD. I wouldn’t fight the downside because momentum is more on the bearish side, but I find it difficult to resolve the structure. Take care because this could be a potential thorn in our side…
Which stock should you buy in your very next trade?
AI computing powers are changing the stock market. Investing.com's ProPicks AI includes 6 winning stock portfolios chosen by our advanced AI. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. Which stock will be the next to soar?
Unlock ProPicks AI