EUR USD (1.2290) Although it is common to talk about investor disappointment with the US payroll data, the latest figure was the closest to the consensus forecast so far this year. This was also the first month where popular expectations for job creation were less than 100,000. The description for investors’ mood was more grim resignation than disappointment. After surveying the state of affairs, and the trend that led to it, they resigned themselves to sub-par US economic growth and no meaningful jobs recovery. As for the Fed policy response: there remains a common belief that (a possibly ineffective) QE3 will come, even though few are convinced that this jobs number will be the catalyst. The euro was already on the ropes ahead of the US employment data. As an earlier downside false break couldn’t deliver any lasting bullish impetus, it appeared that long-term selling of euros remains the order of the day. After the data release, the expected erosion unfolded right into the 1.2220/40 zone. Thereafter, we think the euro was able to bounce. However, the same pressures that brought it there are likely to persist, meaning that one should already expect a further decline to 1.2150 and then to 1.2010. We see the latter as the current near-term risk. To the upside, we believe the toughest nearby hurdle is at 1.2450. However, its reaction at or ahead of the 1.2365/95 zone will testify to the intensity of the selling.
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Deutsche Bank