Where Are the Bulls Today? Rallying Around the Dollar.

Unrelentingly bullish - that’s the US dollar sentiment for you right now (with the exception of USD/JPY). Despite crude oil rebounding after the Department of Energy reported an unexpected 1.9 million drop in US oil stocks, the US dollar reached the highest level against the Euro for this year during New York trading Thursday, something that was completely unexpected by many bank analysts, and surely something that is irking many who have been insisting that the dollar cannot be rallying and should not be rallying. In fact, the dollar’s late NY morning surge in the forex markets has prompted a slight intraday decline of oil prices.

Both the Bank of England and the European Central Bank left interest rates on hold - the UK rate at 5% and the Eurozone rate at 4.25%. Even though ECB’s Trichet sounded hawkish in the press conference by saying that upside risks to price stability prevail, that was not even enough to save Euro from behaving like sand slipping through a net when he emphasized prevailing downside risks to the Eurozone economy. He said that the economy is in an episode of weak activity, partly the result of high commodity prices, and that uncertainty about the outlook remains particularly high.

The Euro also got beaten up following IMF’s comments that the Euro exchange rate is still “on the strong side” even taking into consideration Euro’s recent weakness. Masood Ahmed, director of external relations at the IMF, said the US dollar is “closer to its medium-term equilibrium value.” That is green light for a continuation of recent USD strength.

After Trichet spoke, EUR/USD fell from 1.4500 to an intraday low around 1.4325, a crucial support zone. If this gives way, Euro bears may push it down towards 1.4280, 1.4240. USD/CHF is hovering around 1.1100.

In stock trading, US stock markets have taken a different route from the strong US dollar. At the time of writing, the Dow [^DJI] was down by more than 240 points, posting its fourth straight day of losses, the longest losing streak since January this year, on worries about a worsening job market in the US.

Latest data showed that the number of newly-laid off people seeking unemployment benefits jumped unexpectedly last week, rising to a seasonally adjusted 444,000, up 15,000 from the previous week. This marks the first increase in applications after three weeks of declines.

Get ready for the Biggest Lottery of the Month Friday, that is the US non-farm payrolls. The unemployment rate is expected to rise to 5.8% in August from 5.7% in July, and 71,000 jobs are expected to be cut. It could be a surprise or a shock, but you can always profit from either outcome.

Economic Calendar For Friday:

German industrial production 1000 GMT

Canada unemployment rate 1100 GMT

US NFP 1230 GMT

Canada Ivey PMI 1400 GMT

Fed’s Yellen speaks on US economy 1955 GMT