Diamonds are forever

Regular readers of this piece may remember my note last week in which I re-visited my late teens as a position keeper in the FX market and mentioned the analogy, ‘buy dollars wear diamonds’. Well, here we are, some 20-something years later, with real evidence that this trade is starting to gather traction.

The market has finally realised that the US jobs report on Friday was still a very solid reading despite the slight miss to the downside as the six-month average has picked up to 244k and with year-on-year growth rising earlier in the week to 2.4% from the 1.7% expected as solid evidence emerges that recent data has US G2 GDP tracking 4%.

The signs are positive that the stronger US data is finally driving the US dollar, with the technical picture now pointing to a move to 83.40 or even 84.00 for the dollar index as the yearly high is broken.

The geopolitical tensions are still leaving the risk trade under pressure as Russian President, Vladimir Putin, threatens retaliatory sanctions against Europe – with airspace restrictions looking more likely than the irrational act of restricting gas supply.

Media reports this morning are suggesting that Russia has sharply increased the number of troops positioned on the Eastern border of Ukraine.

The Asian session was dominated by the fall in the NZD, following on from yet another disappointing dairy auction from the world’s largest exporter, Fonterra.

The employment data overnight showed a mixed picture as the unemployment rate dropped from 5.9% to 5.6%, but with the participation rate and wage growth failing to meet expectations, it was deemed a sell the rally event.

The UK will remain in focus this morning with the release of industrial production data, following what has been deemed a disappointing TV rebate by the pro-independence leader in Scotland.

While, across the pond this afternoon, the latest US trade balance will be revealed.

EUR/USD

Supports 1.3340-1.3320-1.3295 | Resistance 1.3390-1.3435-1.3480

USD/JPY

Supports 102.30-102.05-101.70 | Resistance 102.75-102.90-103.10

GBP/USD

Supports 1.6835-1.6800-1.6740 | Resistance 1.6890-1.6925-1.6985