US Nonfarm Payrolls Ahead, Yen Selling Continues

U.S. Dollar Trading (USD): The Dollar had a mixed day with the European and UKcurrencies enjoying good gains while the Yen and Gold were under heavy sellingpressure. Chicago PMI was strong at 55.6 vs. 50.5 forecast and help spark a Yencross rally which allowed the USD/JPY to hit fresh highs above Y92. Looking ahead, January NonFarm Payrolls forecast at 161k vs. 155kpreviously. The Unemployment Rate is forecast unchanged at 7.8%.

The Euro (EUR): The Euro broke higher in late New York trade withnew trend highs in Asia above 1.3600. The market is overbought but the trend isstrong and there seems to be little concern from the European officials at therecent rise across the board for the Euro. The Sterling (GBP) did well in a market caught short on the cabletaking advantage of the USD weakness and tracking the EUR/USD rally. Resistancewas found at 1.5880 and we consolidated for the rest of the session andthroughout Asia on Friday.Looking ahead, UK January Manufacturing PMI forecast at 51.0 vs. 51.4 previously.

The Japanese Yen (JPY): The Japanese Yen was sold aggressively across the board in waves ofselling for the last 24 hours hitting trend highs against the USD, EUR and GBP. USD/JPY has tested Y92 in Asia trade ahead of the Key nonfarm payrolls tonight. EUR/JPY, while heavily overbought, is showing no signsof slowing down breaking above Y125 easily overnight.

Australian Dollar (AUD): The AUD continued to underperform overnight withselling once again selling into a small rally inspired by strong AUD/JPY buyingand EUR/USD moves higher. The main reason for the underperformance has beenstrong cross buying on the EUR/AUD and GBP/AUD which have been enjoying solidgains this week. EUR/AUD hit 1.3100 and up from1.2400 at the start of January. UpdateQ4 PPI at 0.2% vs. 0.6% previously q/q.

Oil & Gold (XAU): Gold fell from the $1675 handle in a technically damaging day for the precious metal. Buyers of Gold after the US GDP have been disappointedand the sharp selling over the last two days has put the bears back in control.OIL/USD continues to be supported on ME tensions and strong risk appetite butfell slightly to profit taking overnight.

Pairs to watch

USD/JPY US NFPs Key forUSD strength or weakness going forward

XAU/USD Strong Jobnumber could push gold below $1650 key support?

TECHNICALCOMMENTARY