Thursday, March 31, 2016

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Location: Investing.com -- EUR/USD surged to fresh 5-month highs on Thursday, extending gains from the previous three sessions, as the euro completed its best quarter against the dollar in five years. The currency pair traded in a broad range between 1.1310 and 1.1412 before settling at 1.1380, up 0.0078 or 0.41% on the session. At session highs, the euro reached its highest level versus the greenback since mid-October. For the quarter, the euro soared by more than 4.75% against its American counterpart, building steam over the last week amid extremely dovish indications from Janet Yellen on a delayed interest rate hike by the Federal Reserve. It marked the strongest three-month period for the euro since the first quarter of 2011, when it jumped 5.8% against the dollar. EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1496, the high from Oct. 15. On Friday, the second quarter will kick off with March's critical U.S. jobs report, which could provide key insight into the Federal Open Market Committee's (FOMC) decision-making process when it meets next in late-April. Earlier this week, Yellen noted that the U.S. economy has displayed remarkable resiliency as the labor market continues to exhibit dramatic improvements. Analysts expect monthly nonfarm payrolls to increase by 210,000 for the month, while the unemployment rate remains steady at 4.9%. In February, U.S. non-farm payrolls shot up by 240,000, pushing the three-month average above 225,000. While the headline unemployment rate remained at eight-year lows last month, economists were also encouraged by a 0.2% decline in U-6 unemployment, a broader gauge of the employment situation nationwide. The U-6 rate, which measures the level of workers marginally attached to the labor markets and no longer actively looking for a job, stood at 9.7% in February. By comparison, the Fed's preferred gauge of U.S. unemployment, peaked at 18% in 2010 at the end of the Financial Crisis. Analysts will also keep a close eye on monthly wage gains after average hourly earnings slumped by 0.1% a month earlier. Also on Thursday, Federal Reserve of Chicago president Charles Evans indicated that he could support a June interest rate hike with sufficient improvements in the economy, one day after strongly hinting that it could be premature to raise short-term rates in April. The FOMC has held its benchmark Federal Funds Rate steady at a level between 0.25 and 0.50% at its first two meetings of the new year. In December, the FOMC abandoned a seven-year zero interest rate policy by approving its first rate hike in nearly a decade. Any rate hikes by the Fed this year are viewed as bullish for the dollar, as foreign investors pile into the greenback in order to capitalize on higher yields. The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.30% to an intraday low of 94.30, hovering near five-month lows. The index closed on Thursday with one of its worst quarters in more than five years. Both USD/CAD and USD/JPY lost more than 6% on the quarter. Yields on the U.S. 10-Year fell to a five-week low at 1.769% on Thursday, ending the day at near-session lows. Over the last year, government bond yields on 10-year U.S. Treasuries are down by 15 basis points.

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