US Dollar extends rally after monthly job report

EUR

The euro gained strongly last Thursday following comments by ECB president Mario Draghi, who reiterated his faith in the gradual recovery of the European economy. As a follow through after Thursday's move, EUR/USD rose to the week's high of 1.3135 on Friday morning.

These gains did not last long however as news of better-than-expected jobs report out of the US hit the wires later that afternoon.  EUR/USD hit a low just above 1.2950 before recovering some of the losses.

Friday´s downgrade of Italy by Fitch and the inconclusive results of the Italian parliamentary elections should continue to put pressure on the single currency, with many observers fearing that the gridlock could hinder further necessary structural reforms if it is not possible to form a stable government in the next few weeks.

USD

The US dollar continued to extend its rally against the other major currencies last week - a rally that saw its inception at the beginning of February. This is one of the longest winning streaks of the dollar on record.

The move gained traction on Friday after the publication of the monthly nonfarm payroll data out of the US, which came out a lot stronger than expected. The US economy saw the unemployment rate edge lower last Friday as well.

It is worth noting that this move came at the same time the Dow Jones Index marked a new record high. The dollar Index jumped after the monthly employment report, quickly approaching the 0.83 level. Investors bought the greenback against all majors after the surprisingly strong numbers, suggesting that the FED might perhaps opt out earlier of the latest quantitative easing program.

GBP

The British pound was one of the few currencies against which the euro gained during the previous week. There were a few hours of cable strength after the BoE left rates on hold and made no changes to the current asset purchase program last Thursday - but these gains quickly disappeared. 

EUR/GBP trades now solidly back above 0.87 and the GBP/USD trades at a two-and-a-half year lows, just below 1.49, after losing some 1500 pips since the beginning of the year.

On one hand the US Federal Reserve could, and should opt out of the latest quantitative easing program at some point in the mid-term future, especially given the latest stronger job numbers.

On the other hand, it seems that the Bank of England is going to increase - rather than decrease -their current asset purchase program, a move which would not be good news for the pound, given how it is expected to remain under pressure for the time being.

Yen

After a two week consolidation period, the Japanese yen resumed the downtrend which started in the fourth quarter of 2012.

A downtrend initiated after Bank of Japan officials underlined their commitment for further monetary easing in order to stimulate inflation. USD/JPY traded at 96.56 on Friday, a level not seen since August 2009.

CHF

In-line with the global risk on sentiment and rising equity markets around the globe, investors pull out of the Swiss franc, widely considered as a safe haven currency.

USD/CHF gained for the fifth time in a row, finishing the week above the 0.95 level. EUR/CHF gained as well for the week, closing just shy of the short term key resistance in the 1.2390 area.

CAD

The Canadian dollar won against most of the major currencies last week after a better than expected jobs report published last Friday. In February the world's eleventh largest economy added 50,700 new jobs versus expectations of an 8,000 increase.

It even managed to gain against the very strong USD last Friday. This leaves the Bank of Canada with the option of a potential rate hike and the Canadian currency profited accordingly. It gained more than 200 pips against the euro after the data.

AUD

The Aussie dollar saw some volatile trading last week around the interest rate decision of the Reserve Bank of Australia. There were some market participants who feared a lowering of the key benchmark rate and sold the AUD/USD, the pair marked a low at 1.0115 ahead of the decision.

When the RBA held its key benchmark rate at 3%, while however saying that it saw room to slash rates further if needed, the pair shot up almost 200 pips until the end of the week. This rise reversed the losses seen ahead of the publication.

Gold

Gold traded in a comparatively narrow range of 25$/ounce only; range which the yellow metal can sometimes cover over a stretch of a few minutes.

The relative quietness hints at an imminent breakout with follow-through momentum to either side. As long as the 1550$ level holds we favour a breakout to the upside and another test of the 1625$ resistance.