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US Dollar Reinvigorated by Slight Beat on May NFPs; USD/JPY Above ¥96

US Dollar Reinvigorated by Slight Beat on May NFPs; USD/JPY Above ¥96

Christopher Vecchio, CFA, Senior Strategist

THE TAKEAWAY: USD Change in Nonfarm Payrolls (MAY) > +175K versus +163K expected, from +149K (revised lower from +165K) > USD Unemployment Rate (U3) (MAY) > 7.6% versus 7.5% expected, from 7.5% > USDOLLAR BULLISH

The much- ballyhooed May US labor market report came right in the “Goldilocks” zone for market participants: good enough to reignite modest optimism about the US economy; but not good enough to provoke a major drawdown in the Federal Reserve’s QE3 program. The important numbers:

- Change in Nonfarm Payrolls: +175K versus +163K expected, from +149K (revised lower from +165K)

- Change in Private Payrolls: +178K versus +175K expected, from +157K (revised lower from +176K)

- Unemployment Rate (U3): 7.6% versus 7.5%, from 7.5%

- Underemployment Rate (U6): 13.8% from 13.9%

- Participation Rate: 63.4% from 63.3%

What does this mean for the QE3 taper – that’s the big question. Yesterday, it seemed that traders were positioning themselves for a poor print: weaker USDJPY, stronger US equities, lower US Treasuries yields. Today, equities are up, the US Dollar is gaining, and US Treasuries yields are higher. This looks like a repositioning for renewed speculation of the QE3 taper – certainly, the data doesn’t lean that heavily in either direction.

USDJPY 1-minute Chart: June 6, 2013

US_Dollar_Reinvigorated_by_Slight_Beat_on_May_NFPs_USDJPY_Above_96_body_x0000_i1027.png, US Dollar Reinvigorated by Slight Beat on May NFPs; USD/JPY Above ¥96

Charts Created using Marketscopeprepared by Christopher Vecchio

Following the release, the USDJPY gyrated violently, trading from ¥95.75 to as high as 96.38, before plummeting to 94.38. But within 15-minutes, the USDJPY had surged back to 96.12, at the time this report was written. US Dollar strength was observed across the board, with the EURUSD falling to $1.3205, and the AUDUSD plunging back to the weekly lows near $0.9440.

--- Written by Christopher Vecchio, Currency Analyst

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