Non Farm Payrolls provides support for the USD, in anticipation of a Fed rate cut

U.S. Dollar Trading (USD) was buoyed by positive payroll readings for the month of November. Following strong release of jobs data earlier in the week, Non Farm Payrolls did not disappoint with the figure coming in slightly higher than forecasts at 94k (Forecast: 90k), whilst previous figures were revised higher to 170k. Bets that the Federal Reserve will cut rates by 50 basis points in the upcoming week were trimmed. Further more the Unemployment Rate for the month of November was unchanged at 4.7%, despite markets expecting a rise to 4.8%. In U.S. share markets the NASDAQ was down -2.87 points (-0.11%) whilst the Dow Jones was higher by 5.69 points (+0.04%) to have little impact on the market. Crude oil fell once again on Friday by US$1.89 a barrel to US$88.34 on expectations that inventories will meet demand during the North American winter. Looking ahead, the week begins with the release of Pending Home Sales data for the month of November. Forecast lie at a net change of -1% (Previous: 0.2% and 85,700) 

The Euro (EUR) eased initially following sturdy payrolls data out of the U.S., as the government report showed that the economy added slightly more jobs then expected for the month of November. In Eurozone specific data, the regions largest nation in Germany saw Industrial Production fall by -0.3%, slightly less than the forecasted -0.4%. Overall the EURUSD traded with a low of 1.4599 and a high of 1.4673 before closing the day at 1.4654 in the New York session. German Trade balance for the month of October will be made public today (Forecast: 17 bln; Previous: 17.9 bln).  

The Japanese Yen (JPY) fell against the dollar for a third consecutive session, extending its longest decline since October. Much of the moves were attributed to positive payrolls data out of the U.S., prompting further weakness against a number of high yielding currencies, as data reflected confidence in carry hungry investors. The JPY lost a total of 0.4% against the USD throughout the week and a 0.6% versus the Euro. Much of the decline in the later part of the week were attributed to President Bush’s plan to freeze interest rates on some sub-prime mortgages, easing concern that credit-market losses will drag down economic growth. The USDJPY traded with a low of 111.18 and a high of 111.79 before closing the day at 111.71 in the New York session. Machine orders for the month of October are released out of Japan on Monday, with forecast at 7%, up from the previous -7.6%.

The Sterling (GBP) paired its gains following the U.S. payrolls data despite its previous session rally in light of rate cut by the BoE of 25 basis points. Overall the GBPUSD traded with a low of 2.0224 and a high of 2.0343 before closing the day at 2.0314 in the New York session. Looking ahead, PPI data (both input and output) for the month of November kick the week off for the UK.  

The Australian Dollar (AUD) traded sideways once again, on the back of other majors. In the little support that the currency found was attributed to growing interest in the carry trade, as speculators grew confident that the U.S. will avoid heading into a recession following Fridays NFP release. Overall the AUDUSD traded with a low 0.8744 and a high of 0.8826 before ending the session at 0.8774 in New York. 

The Canadian Dollar (CAD) was one of the few currencies to find strength following reports which showed the nation's employers added five times more jobs in November than economists had forecast, stretching the rally to two consecutive sessions. In other news, Unemployment Rate for the month of November failed to add any extra boost coming in at 5.9%, up from the previous 5.8%. Overall the USDCAD traded with a low of 1.0010 and a high of 1.0150 before ending the day at 1.0045 at close of New York.  

Gold (XAU) was volatile once again, falling on the back of declining energy costs reduced appeal for an inflation hedge. XAU traded with a low of 791.70 and a high of 804.80.  
 

TECHNICAL COMMENTARY

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.4518	1.4527	1.4655	1.4770	1.4859
USD/JPY	108.27	109.48	111.55	111.79	112.88
GBP/USD	2.0086	2.0181	2.0305	2.0525	2.0612
AUD/USD	0.8654	0.8661	0.8750	0.8921	0.8939
XAU/USD	773.00	777.20	795.00	808.05	815.70

Euro – 1.4655
Initial support at 1.4527 (Dec 6 low) followed by 1.4518 (Nov 12 low). Initial resistance is now located at 1.4770 (Dec 12 high) followed by 1.4859 (Nov 28 high).
 
Yen – 111.55
Initial support is located at 109.48 (Nov 28 low) followed by 108.27 (Nov 26 low). Initial resistance is now at 111.79 (Dec 7 high) followed by 112.88 (Nov 9 high)
 
Pound – 2.0305
Initial support at 2.0181 (Dec 16 low) followed by 2.0086 (Sep 25 low). Initial resistance is now at 2.0525 (Dec 3 breakout low) followed by 2.0612 (Dec 5 high)
 
Australian Dollar – 0.8750
Initial support a 0.8661 (Dec 5 low) followed by 0.8654 (Nov 28 low). Initial resistance is now at 0.8921 (Nov 28 high) followed by 0.8939 (38.2% retracement of the 0.9400 to 0.8654 decline)
 
Gold – 795.00
Initial support at 777.20 (Dec 3 low) followed by 773.0 (Nov 20 low). Initial resistance is now at 808.05 (Nov 29 high) followed by 815.70 (November 27 high)