Euro Opens Below $1.27, Shorts Piling On

The euro fell to the lowest levels since September after the US added 200K jobs in the non-farm payrolls report. JPY and USD were the top performers while CAD and EUR lagged. The weekly CFTC speculative positioning report showed another record high in EUR shorts.

The headlines on non-farm payrolls were strong with 50K more jobs than expected and the unemployment rate falling to 8.5% but details were more cautious. A major sticking point was jobs in the shipping and delivery sector, which added nearly 50K to the headline. History has shown that these jobs were will disappear after the holidays.

The market reaction to the report was interesting with USD broadly gaining on the positive headlines. This is a theme that could persist for a number of weeks.

USD/JPY hit a session high of 77.33 after digesting the NFP details, the pair began to trend lower. The declines continued after dovish commentary from Dudley and Rosengren. Both suggested more Fed action, particularly in mortgages. USD/JPY closed the day near the lows, at 77.00.

The Canadian dollar was a laggard. Canadas jobs report was roughly in-line with estimates but the full-time/part-time jobs breakdown was sharply negative. USD/CAD marched higher throughout the day and closed at the highest levels since mid-December. The gains are particularly noteworthy given the climb in oil and other commodities during the week.

Markets turn to US earnings season this week, with the SP 500 closes above its 55 WMA for 1st time since July, just ahead of Q4 corporate results.

CFTC Commitments of Traders

Euro shorts hit a fresh record and yen longs more than doubled in Fridays CFTC data. The data (as of Jan. 3) showed that traders had no problem holding EUR shorts through year-end. The EUR net fell to -139K from -128K. Other currencies were up or flatish. JPY longs jumped to 56K from 22.5K something that makes intervention considerably more likely in the week ahead. AUD longs also jumped to 46.5K from 32.5K. GBP and CAD positioning turned slightly more negative at -23K and -32K, respectively.

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