Dollar Rises on Positive Non-farm Payroll numbers

March 9, 2007

The dollar rallied after the Labor Department reported an increase of 97,000 jobs in the non-farm sector in February. The numbers was in line with the general forecasts, however it was much higher than what many large investment banks expected. The report released for the previous month was revised from 111,000 jobs to 146,000 jobs. The unemployment rate eased to the December 2006 level of 4.5% down from 4.6% in January. Steady economic pace decreased the likelyhood of a rate cut by the Federal Reserve during its meeting on March 20-21.
The Department of Commerce reported that the US trade deficit narrowed more than expected to $59.1 billion in January as U.S. exports increased to an all-time high.

Positive employment numbers coupled with a drop in the trade deficit eased the U.S. sell-off providing support for the dollar. As seen in the EUR/USD chart below the euro dropped from 1.3155 to 1.311 after the data release. The dollar might strengthen even further in the week ahead. Current support level for EUR/USD is 1.3080 March low followed by 1.3062 fibonacci retracement level (from 1.3362 to 1.2866. Resistance levels are the 1.377 fib level and the February high of 1.3258.

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