Wow! The Dollar just woke up.
Friday saw a major shock to the markets as Non-Farm Payroll printed a negative 11,000 number. -119,000 was the expected number. Needless to say, that caught a lot of people off guard. This lead to several interesting moves, all involving the USD gaining ground with conviction.
Gold got absolutely pummeled after this number came out, as traders got a first hand look at what a bubble being popped looks like. I have been warning about a possible landslide in the Gold markets for a while now. The thing about Gold is that when everyone runs towards the exits – it gets brutal, and fast. Think about it, the underlying commodity (Gold) is priced in USD, and as the USD goes up in value, it takes less of them to buy that ounce of Gold.
The chart below shows the Dollar Index. The Dollar Index is simply a futures contract that prices the USD against a basket of currencies. (Hence the name.) Take a look at this trend line we slammed up against on Friday. If we can get above that line and hold, we should see continued upside for the USD.
You can see that the move up is predicated by a support level as well. This could be a sign of either a run up, or possibly the start of consolidation. Often, a consolidation period will proceed a trend change. It is possible that we will see either one of those moves. The key will be how Asian traders react on Monday morning, Sunday night in the US. If we see a gap up in the USD – we could see some real follow through on the thrust upwards.
Think of this: You are a trader in Tokyo who has been making a killing shorting the USD, and buying Gold. Can you imagine what your thoughts must be on Saturday morning when you wake up and see Gold fell something like $60 an ounce? Not to mention the USD/JPY going straight up. I think there could be some real fireworks in Asia tomorrow night! (NY time that is….)
Chris
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