Non Farm Payrolls provides temporary relief on the dollar as markets forecast further Fed rate cuts

U.S. Dollar Trading (USD) eased on Friday despite a mid session rally. Mid way through the New York session the Dollar was boosted by a positive Payrolls reading with figures coming in at 166K, well above expectations of 80K jobs for the month of October. Yet any gains were paired as growing concerns of deepening credit market losses prompted investors to pre-empt further rate cuts by the Federal Reserve this year. Many of the moves were instigated by write downs on collateralized debt obligations for Merrill Lynch, which may reach $10 billion. In other data news, positive readings remained the theme for the session with stable Unemployment rate (4.7%) and confirmation of Durable Goods (Revised) for the month of September coming in at -1.7%, although they did little to provide the greenback with any added support. In U.S. share markets the NASDAQ was up by 15.55 points (+0.56%) whilst the Dow Jones was also up by 27.23 points (0.2%) prompting investors to rebuild high yielding carry trades. Crude oil once again remained well supported as energy prices surged. Crude was up US$2.26 a barrel to US$95.75. Looking ahead, ISM manufacturing data will be released for the month of October, with economists forecasting a figure of 54, slightly down on the previous 54.8.
 
The Euro (EUR) traded at record highs, having earlier sustained significant selling pressure. Positive Jobs data had attributed to much US Dollar strength; before reports circulated that credit turmoil in the economy may indeed worsen, causing market expectations of future rate cuts out of the Federal Reserve. In data news, PMI manufacturing was released flat on consensus with a figure of 51.5. The EURUSD traded with a low of 1.4417 and a high of 1.4528 before closing the session at 1.4500 during New York’s day of trading.
 
The Japanese Yen (JPY) was relieved of much of its role as a funding currency during the Asian session as the Nikkei closed down 352.92 points (-2.09%). Overall the Japanese Yen was relatively steady though against the USD as investor remained cautious on further credit turmoil’s ahead of U.S. payrolls data. The USDJPY traded with a low of 114.37 and a high of 115.42 before closing the day at 114.69 in the New York session.
 
The Sterling (GBP) rose to a fresh 26 year high against the dollar on growing concerns that the Federal Reserve will be inclined to cut interest rates again this year. The Sterling Pound did well to shrug of any concern of Credit turmoil in the UK as share prices in Barclays fell 8% for the session. Overall the GBPUSD traded with a low of 2.0767 and a high of 2.0897 before closing the day at 2.0889 in the New York session. Monday sees a heavy slate of manufacturing data out of the UK, in which markets are expected to pay plenty of attention too.

The Australian Dollar (AUD) was extremely choppy throughout the session, succumbing to ongoing carry trade unwinding, and weighed upon by a positive reading in US jobs data. Yet any further downside moves were limited as market sentiment returned to risk appetite, pushing the AUD above key 92 cent levels. Overall the AUDUSD traded with a low of 0.9122 and a high of 0.9245 before closing the day at 0.9201 in the New York session. 
 
Gold (XAU) rose almost 2 percent to close above $800 an ounce for the first time in 27 years as investors bought the metal as a haven from credit-market turmoil related to the collapse of U.S. sub prime mortgages. XAU traded with a low of 787.90 and a high of 807.70.
 
TECHNICAL COMMENTARY

Euro 1.4510
Initial support at 1.4419 (Nov 2 low) followed by 1.4371 (Oct 30 low). Initial resistance is now located at 1.4528 (Nov 2 trend high) followed by 1.4530 (March 1995 synthetic high)
                                        
Yen 114.75
Initial support is located at 114.38 (Nov 2 low) followed by 113.78 (Oct 25 low). Initial resistance is now at 115.93 (Nov 1 high) followed by 116.64 (Oct 17 high).
 
Pound – 2.0875
Initial support at 2.0755 (Nov 1 low) followed by 2.0671 (Oct 31 low). Initial resistance is now at 2.0896 (Nov 2 trend high) followed by 2.1000 (Psychological round number)
 
Australian Dollar – 0.9210
Initial support a 0.9109 (Nov 1 low) followed by 0.9076 (Oct 26 low). Initial resistance is now at 0.9251 (Nov 2 high) followed by 0.9344 (Oct 31 trend high).
                                                                                
Gold – 807.10
Initial support at 777.10 (Oct 31 low) followed by 768.80 (Oct 26 low). Initial resistance is now at 808.25 (Nov 2 trend high) followed by 810.00 (Round number resistance)