By: Alex Brandt
After a stunning blow to dollar longs, one has to wonder if last Fridays dismal NFP report will continue next month, or if it is just a hiccup in the US recovery. At the start of today's Asian Session the dollar strengthened, but as of now has reversed those gains. The start of this trading week got off to a bang as the Euro, AUD, NZD, and CAD all extended their gains. The GBP/USD did rally, but then lost all of its gains as the day went on. Despite NFP Novembers number being revised to postive territory; in a economy where 4.8M people are looking for work a 4,000 gain in one month does not make me dollar bullish. Whats more telling is that the biggest employment was seen in temporary jobs. The fact that people are find more work on a temporary basis does not bode well for February NFP, in which I believe we will see businesses laying off again because they overextended themselves over the holiday season expecting bigger demand and sales. I believe the rest of this month we will see dollar weakness, and carry trade flows into AUD and NZD pick up as trader's expectations for a US Federal Reserve rate hike in 2010 is negligible.
There are still major fundamental hurdles the US economy has to overcome, such as a glut of commercial real estate, people still upside-down in their home mortgage because banks are unwilling to work with them, and that business are more interested in hiring temporary workers. Until those things change, and positive job growth returns I will be dollar bearish.