Non farm payrolls disappoint on the downside. Oil pulls back. US recession fears heightened.

U.S. Dollar Trading (USD) was weaker after US non-farm payrolls posted a rise of only 18,000 for the month of December which was the lowest result in almost five years. Markets were expecting a result closer to 70k. On a brighter note, ISM services posted a smaller loss than expected at 53.9 from 54.1 previous. Unemployment rose to 5% from 4.7% which added to the growing sentiment of a possible recession in the US. In U.S. share markets the NASDAQ was down -98 points (-3.8%) whilst the Dow Jones dropped 256 points (-2.0%). Crude oil pulled back by US$1.27 a barrel to US$97.91 as the weaker payroll number ignited fears of a slowdown in US demand for oil.

The Euro (EUR) gained against the dollar initially, before pulling back after ISM services data was released. PMI Services for the Eurozone fell to 53.1 from a 53.2 estimate. The EURUSD traded with a low of 1.4695 and a high of 1.4825 before closing the day at 1.4772 in the New York session. Looking ahead, PPI and unemployment are both due out today.

The Japanese Yen (JPY) continued to strengthen versus the USD after the non-farm payrolls report, prompting the JPY to gain against the 16 most actively traded currencies. Overall the USJPY traded with a low of 107.90 and a high of 109.60 before closing the session at 108.46. 

The Sterling (GBP) gained against the greenback as PMI services came in much better than expected at 52.4 from a 51.6 estimate prompting markets to speculate that the BoE will keep rates on hold for the time being. The GBPUSD traded at a low of 1.9676 and a high of 1.9849 before closing the day at 1.9721 in the New York session.

The Australian Dollar (AUD) was weaker against the greenback after the drop in non-farm payrolls prompted a sell-off in equities and risky leveraged trades such as the aud/jpy carry trade. Also, with expectations of interest rate cuts in the US, markets fear that the RBA could leave rates on hold rather than hike at their next meeting. Overall the AUDUSD traded with a low of 0.8721 and a high of 0.8836 before closing the day at 0.8725 in the New York session. Looking ahead, building approvals are due out tomorrow.

Gold (XAU) fell tracking the pullback in oil and reflecting a possible slowdown in economic growth in the US. XAU fell by USD$3.50 to USD$865.70 an ounce.
 
TECHNICAL COMMENTARY

Euro – 1.4750
Initial support at 1.4688 (Jan 3 low) followed by 1.4570 (Dec 31 low). Initial resistance is now located at 1.4825 (Jan 4 high) followed by 1.4859 (Nov 28 high).
 
Yen – 108.55
Initial support is located at 107.91 (Jan 4 low) followed by 107.23 (Nov 26 trend low). Initial resistance is now at 109.59 (Jan 4 high) followed by 109.76 (Jan 3 high)

Pound – 1.9745
Initial support at 1.9675 (Jan 4 low) followed by 1.9653 (Aug 17 reaction low). Initial resistance is now at 1.985 (Jan 4 high) followed by 1.9898 (Jan 2 high)
 
Australian Dollar – 0.8720
Initial support a 0.8667 (61.8% retracement of the 0.8553 to 0.8852 advance) followed by 0.8624 (76.4% retracement of the 0.8553 to 0.8852 advance). Initial resistance is now at 0.8852 (Jan 2 high) followed by 0.8877 (38.2% retracement of the 0.9400 to 0.8553 decline)
 
Gold – 860.00
Initial support at 853.60 (Jan 3 low) followed by 833.90 (Jan 2 low). Initial resistance is now at 869.20 (Jan 3 high) followed by 874.27 (Jan open + (Dec * range 0.618)