US Dollar
After three weeks of near continuous losses, the US dollar managed to stage a very strong rally on the back of the non-farm payrolls release.  Even though the number of jobs created in the month of October fell short of expectations, the market shrugged off the report and focused on the upward revision the prior month.  These days, US data needs to be looked at on so many different levels and todayââ,¬â"¢s NFP report was no exception.  If you looked at the 92k print alone, it would seem that the US economy had another month of weak job growth.  However, that is not true given the 97k upward revision in the month of September and the drop in the unemployment rate from 4.6 to 4.4 percent.  With an average job growth of 120k over the last 2 months, the labor market remains tight.  In contrast to the manufacturing sector, the service sector ISM index actually increased from 52.9 to 57.1, the highest level since May.  However, the problem is that todayââ,¬â"¢s move in the US dollar stalled right at a critical resistance level and the week ahead brings us a number of potentially dollar bearish news.  Aside from speeches by a variety of Fed Presidents on the economic outlook, we also have the trade balance and the Mid-term elections.  Given the rarity of the event, the Mid-term elections could have a meaningful impact on the currency markets.  In all but one of the past six Mid-term elections, the US dollar has rallied in the 3 months afterwards.  The common theme between each of these elections is the fact that it was a one-party majority win.  The reason why this is perceived as dollar positive is because it allows for legislations to be easily passed and in this case, given that the Republicans control the majority of Congress, their one party majority win would be seen as pro business.  However, if Democrats win over Republicans, the political gridlock would delay any legislation and potentially hold back government policy changes for the next two years.  In this case, it would most likely be perceived as dollar negative.

Euro and Swiss Franc
Even though the EUR/USD sold off today, the market has not forgotten about ECB President Trichetââ,¬â"¢s extremely hawkish comments from Thursday.  The Euro quietly licked its wounds and retraced about a third of this morningââ,¬â"¢s losses.  The sole release from the Eurozone today was the unemployment rate for the month of September, which held steady at 7.8 percent, after a downward revision from 7.9 to 7.8 percent for the month of August.  This is yet another piece of evidence that the economy is improving, which should keep the EUR/USD strong going into the new week.  Unlike the US, which has only 2 major releases for the market to focus on, the Eurozone has a number of important data due for release including retail sales, as well as industrial production and trade balance for Germany and France.   The ECBââ,¬â"¢s hawkish stance should be further confirmed by the release of the November monthly bulletin next Thursday and unless we have a majority Republican win in the US Mid-term elections, further losses are probably limited.

British Pound
All rallies meet phases of exhaustion and we saw just that in the British pound today as the currency buckled under dollar strength.  After having rallied for six straight trading days and consolidating for one, the surprisingly robust non-farm payrolls release was enough for pound bulls to throw in the towel, albeit probably only temporarily.  UK economic data continues to print stronger with the CIPS Services PMI index rising from 57.0 to 59.3 in the month of September, which is the highest reading that we have seen the index since April.  This indicates that not only is the construction sector doing well, but so is the service sector which leaves the central bank on track to raise interest rates from 4.75 to 5.00 percent next Thursday.  Aside from the monetary policy meeting, we are also expecting a number of key economic releases including industrial production, BRC retail sales and the trade balance.  The pound has been very strong and should remain so for the coming week.

Japanese Yen
The Japanese Yen has now sold off for three straight days despite the lack of any meaningful economic data.  Fukui has really killed the currency this week when he said the central bank was in no rush to raise interest rates.  This gave carry traders the green light to continue to stay short the Japanese Yen.  There was quite a bit of liquidation earlier this week and the recent moves could be a reflection of those same traders reinitiating positions.  There is a handful of Japanese economic data next week but nothing of consequence.  EUR/JPY is back above 150 ââ,¬â€œ when we visited this level on prior occasions, comments from either Japanese officials or officials from other countries frequently surfaced as attempts to talk up the currency (Japanese Yen).  We would be cautions of the same thing happening again if prices remain above that level in the week ahead.

Commodity Currencies (CAD, AUD, NZD)
The commodity currencies have had a big run this week led by strong gains in the Australian and New Zealand dollars.  The Canadian dollar lost strength, but was saved a bit by todayââ,¬â"¢s stronger employment data.  Originally expected to rise by only 15k in the month of October, the net employment change actually increased by 50.5k, bringing the unemployment rate down to 6.2 percent from 6.4 percent, the lowest level since June.  At this point, the economic outlook for the economy is unclear and the hope is that either Bank of Canada Governor Dodge or Deputy Governor Longworth will clarify things in their speeches next week.  If not, the Canadian dollar could continue to suffer from the remnants of the surprise tax on income trusts.  Australia has an interest rate decision next week and despite the weaker data yesterday, they are still expected to raise interest rates to 6.25 percent.  Aside from the announcement, Australia will also be releasing housing finance and labor market data.  New Zealand also has some labor market reports due for release but unlike Australia, the economy is not performing as well, which suggests that the data could come in softer.

Kathy Lien is the Chief Currency Strategist at FXCM.