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There is a sense of déjà vu with regard to Payroll this month as exactly the same arguments that I posted last month are true again this. Both the ISM Manufacturing and Non Manufacturing employment numbers were extremely strong, posting even larger gains that the previous all time best levels since 2004 and 2008. Yet, once again this failed to feed through into the Payroll data. This time the widely touted excuse is the poor weather, especially in the North East. For me, this seems a weak argument as I thought only the British economy came to a standstill whenever half an inch of the “wrong type” of snow fell, and having been in New York in February, it seemed as busy as ever. Certainly the weather had a limited impact to my eyes. My other concern is the strength of some of the retail sales numbers for individual stores such as Macy and Dillard’s, which were much stronger than analyst’s predictions, with headlines stating how the snow did not have an effect. Well, if shoppers ignored the snow, why didn’t employers? Certainly for Payroll they can be no excuses next month and they must be much stronger, with further upward revisions on previous months. The impact of census hiring should begin to take effect as well.

In the last month only the Pound has displayed any real weakness and Canada strength as other major’s moves against the Dollar have largely been muted. This means from a technical prospective that the Dollar Index remains well bid as it sits at the top of the current trend. However, it needs to reassert itself now and restart its trend. Moves below 0.7930 would be negative and would likely coincide with breaks above 1.3840 on the Euro/dollar.

A quick mention on the Pound, which is seeing values last seen against the Canadian Dollar back in 1985, when Cable was almost 1 to 1 with the U.S. Dollar. Technically on the Pound Cross Rates I am getting major signals of an oversold situation on daily data, which suggests that for now, the major part of the downtrend has occurred. This opens up the possibility of a period of sideways, with the risk of short lived vicious short covering bounces as the situation is unwound. Certainly, any new lows need to be treated with caution in the short term and played with tight trailing stops.

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