What USD Strength Says About Payrolls

The U.S. dollar traded higher against all of the major currencies ahead of Friday’s non-farm payrolls report. The strength of the dollar reflects the market’s relief that any increase in job losses in February will be reversed in March. There has been a lot of chatter about how the two snowstorms in the Northeast may have caused job losses to explode last month. Based upon the price action in the dollar today, it would be reasonable to assume that forex traders will downplay tomorrow’s non-farm payrolls report. However traders tend to have short term memory which means there could still be a sharp reaction to a surprisingly weak or strong NFP number. The only difference is that the knee jerk reaction could be reversed quickly.