Fundamental Analysis:

The U.S dollar strengthened against the Japanese Yen and other major currencies during last week’s trading session after a tremendous U.S. jobs report helped strengthened hawkish arguments for an imminent interest rate hike by the Federal Reserve next month.

On Friday morning, the U.S. Department of Labor said in its October national employment report that nonfarm payrolls surged by 271,000 last month, significantly above expectations for a consensus gain of 190,000. The sharp gains marked the largest increase in U.S. nonfarm jobs since last December. Private payrolls also soared by 268,000 in October, above forecasts of a 174,000 increase.

The U-6 unemployment rate, a broader gauge of the national employment situation, fell by 0.2% to 9.8%, its lowest level since May, 2008. The reading, which measures the total level of unemployed workers plus those marginally attached to the labor force, stood at 11.1% last October. The indicator also accounts for workers who are no longer looking for a job, but have looked for one over the last 12 months.

On Wednesday in testimony before the House Financial Services Committee, Yellen sent strong hints that the Federal Open Market Committee could raise short-term interest rates at its December meeting if the economy demonstrated continued improvement. The FOMC’s benchmark Federal Funds Rate has remained at its current near-zero level since 2009. Following Friday’s optimistic employment report, the CME Group (O:CME) increased the probability of a December rate hike to 70%, up from a percentage in the low 60s in response to Yellen’s comments on Capitol Hill.


Technical Analysis:

Weekly bias remains on the upside as 21 and 55 EMA is crossed upward on the 4 hours and Daily, Weekly and Monthly time-frames respectively implying that more rise is still in progress. Also SSRC oscillator signals more bullish momentum is confirmed for the week. More rise for a test on 125.27/85 resistance zone is expected. On the downside, below 121.62 minor support will turn bias neutral and bring consolidations before staging another rally.


In the week ahead, investors will be looking ahead to Friday’s U.S. data on retail sales, producer prices and consumer sentiment for fresh indications on the likelihood of a December rate hike.

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