Here’s the initial reaction to the Employment Report

US Non Farm Payrolls printed at -35K
versus consensus expectations of -150K as Katrina’s effect was far less
destructive than initially feared.
The true extent of the damage,
however, may not be known until next month when the Labor Department will make
adjustments to this preliminary reading.

Meanwhile, last months numbers showed a material upward
adjustment from 169K originally reported to the final figure if 211K. Overall
the data confirms the dollar bulls argument that the US economy is fundamentally
sound and will absorb the impact of both Katrina and Rita hurricanes with
relative ease. The EUR/USD dropped about 40 points in the aftermath of the
release but recovered some of the loss, reflecting the market’s uncertainty
about the veracity of the figures.

In the last two days the dollar lost ground across all the
majors, falling nearly 200 points against the euro and 300 points against
sterling. Although the NFP data by itself may not spur strong dollar buying, as
we reported earlier this morning “our proprietary Sentiment Speculator Index has
flashed severely overbought levels in GBP/USD with 3.5 cable bulls for every
dollar bull and in the USD/JPY where there are now 3 dollars shorts for every
yen short. We haven’t seen such skewed positioning in several months which
suggests that the dollar could rally once again.”


Boris Schlossberg serves as Senior Currency
Strategist with Forex Capital Markets in New York, the largest retail forex
market maker in the world. He is a monthly contributor to SFO Magazine with
articles focused on understanding proper risk management, trader psychology and
true market structure. He is also a featured expert at and a frequent
commentator for the Marketwatch From Dow Jones Currency and Bond Report