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Eurodollar Trend 7 Jan 2010

The current whipsaw price action in the euro vs dollar is the result of a number of factors, the most significant being tomorrow’s non farm payroll data.  Last month’s unexpected figure of -11k against a forecast of -119k signalled the start in a change of sentiment towards the US dollar and if tomorrow sees the first positive number coupled with a fall in the unemployment rate then we may see the dollar continue to strengthen further.  Meanwhile although Wednesday’s ADP figures came in slightly worse than forcast at -84k against a forecast of -74k nevertheless they represented the smallest drop since March 2008.   The dollar was further boosted by positive comments from analysts from both BNP Paribas and Merrill Lynch as well as COT data which for the week ended 15 December 2009 showed the majority of speculators had shifted from short dollars to long dollars: a net Euro short of 16,448 contracts, a sharp reversal from the net Euro long of 51,045 contracts from 6th October,  itself the largest long since the 8th January 2008.   Much of the reversal in sentiment towards the Euro can be blamed on the problems with Greece and its spiralling deficit.

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