Daily Outlook - US NonFarm Payrolls Ahead, Market Expecting Big Number U.S. ...

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U.S. Dollar Trading (USD) stocks dipped in Asia and in Europe as risk aversion crept higher on European banking fears. The US session saw some stabilization and recovery in stocks into the close. The USD did not reverse gains against the Euro however with sentiment towards single currency extremely negative at the moment and the EUR/USD caught in a strong downtrend. In US stocks, DJIA +3 points closing at 12415, S&P +3 points closing at 1280 and NASDAQ +10 points closing at 2669. Looking ahead, December NonFarm Payrolls forecast at 150k vs. 130k previously. The unemployment rate is expected to tick higher to 8.7% vs. 8.6 previously.

The Euro (EUR) the down trend continued with the major slipping below 1.2800 and staying under the figure for the rest of the trading day. EUR/JPY also continued lower with a test of Y98.50 at lows. The Euro weakness is broad with the EUR/GBP slipping to 0.8250 and EUR/AUD slipped under 1.2450. Looking ahead, Eurozone November Retail Sales forecast at -0.2% vs. 0.4% previously. German November Industrial Orders forecast at -1.7% vs. 5.2% previously.

The Japanese Yen (JPY) USD/JPY moved higher back above Y77 as the US economic data continued to improve. Also weighing on the Yen was reports that IMF would be stress testing banks. ADP US non farm employment change came in at 325k in December vs. 204k previously. Today’s official nonfarm payrolls is always a big USD/JPY mover and will be closely watched after the announcement.

The Sterling (GBP) PMI data was better than expected but the heavy EUR/USD selling sent the GBP/USD back to 1.5500. December PMI services improved to 54 vs. 52 forecast. The outlook is linked to the USD strength and Euro and will struggle to hold gains while the Euro remains under pressure.

The Australian Dollar (AUD) the Aussie struggled in the European session hitting 1.0230 lows after breaking below 1.0300 in the Asian session. The market then stabilized with US stocks but struggled to bounce with the market uncertain if the Euro crisis is going to ease anytime soon and many caught long after the large rally earlier in the week.

Oil & Gold (XAU) Tested $1600 before gaining to $1620 as the precious metal continued to rally for a 4^th day. OIL/USD fell sharply after Iran threats failed to support the market with little new action to back up the words. Support was founds at $101.50 a barrel.

Pairs to watch

EUR/USD to fall further is US data impresses?

USD/JPY to return to Y78 on Jobs data?

TECHNICAL COMMENTARY

Euro – 1.2785

Initial support at 1.2644 (Sept 10 2010 low) followed by 1.2588 (Aug 24 2010 low). Initial resistance is now located at 1.2947 (Jan 5 high) followed by 1.3080 (Dec 28 high)

Yen – 77.20

Initial support is located at 76.58 (Nov 18 low) followed by 76.00 (Big Figure). Initial resistance is now at 77.74 (Dec 30 high) followed by 78.98 (Nov 1 high).

Pound – 1.5500

Initial support at 1.5469 (Jan 2 low) followed by 1.5402 (Dec 30 low). Initial resistance is now at 1.5629 (Jan 5 high) followed by 1.5728 (Dec 22 high).

Australian Dollar – 1.0240

Initial support at 1.0233 (Jan 3 low) followed by the 1.0196 (Jan 2 low). Initial resistance is now at 1.0447 (Dec 8 low) followed by 1.0567 (Mar 3 high).

Gold – 1624

Initial support at 1592 (Jan 4 low) followed by 1561 (Jan 2 low). Initial resistance is now at 1641 (Dec 21 low) followed by 1662 (50% retrace of 1802.93-1522.65).

Oil – 101.65

Initial support at 100.00 (Intraday Support) followed by 99.00 (Intraday Support). Initial resistance is now at 102.50 (Intraday resistance) followed by 105.00 (Intraday Resistance).

Written by Anthony Darvall