ASIA/EUROPE FOREX NEWS WRAP

The US Dollar has seen renewed vigor over the past few days with the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) rising to its highest level in a week, and readying for a test of 10000.00 if a few events break the right way. In fact, with risk-aversion prevalent overnight, especially among the European currencies, the US Dollar is set up for a strong day should the November labor market reading prove favorable.

The Nonfarm Payrolls report due today is the least important release of the series for the entire year thus far. At the beginning of the year, NFPs fueled speculation over what the Federal Reserve would do with its monetary policy; and in the middle of the year, NFPs was a focus point for both Democrats and Republicans alike ahead of the elections. But now, with the US economy seeing a string of better US data over the past two or three months (thus reducing speculation over the Fed) and the elections behind, the November report carries much less significance.

However, this report is interesting for one reason: what will be the impact of Hurricane Sandy? In the weeks after the storm, especially in early-November, weekly claims figures were clearly higher (weaker labor market) as a result. Will Sandy have the same impact on NFPs? Economists think so: forecasts are calling for what would be the third weakest reading of the year at +85K (June NFPs were +45K). We think the usual paradigm will play out – the better the figure, the stronger the US Dollar, especially against the Japanese Yen and Gold – but overall this figure is a crapshoot. A reading over +100K should be considered strong.

Taking a look at European credit, peripheral bond yields are slightly higher, confirming the Euro’s weakness (although the moderation in rising yields means that the Euro could start to base soon). The Italian 2-year note yield has increased to 2.033% (+2.0-bps) while the Spanish 2-year note yield has increased to 2.941% (+3.0-bps). Similarly, the Italian 10-year note yield has increased to 4.574% (+1.5-bps) while the Spanish 10-year note yield has increased to 5.472% (+13.8-bps); higher yields imply lower prices.

RELATIVE PERFORMANCE (versus USD): 12:45 GMT

JPY: +0.12%

NZD: -0.12%

CAD: -0.17%

AUD:-0.17%

GBP:-0.24%

CHF:-0.47%

EUR:-0.52%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.17% (+0.05% past 5-days)

ECONOMIC CALENDAR

See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.

TECHNICAL ANALYSIS OUTLOOK

EUR/USD: The pair has dropped over 200-pips the past few days, and is nearing support near 1.2880/1.2900. Momentum is clearly to the downside, but with 1H and 4H RSI oversold once again, right as the pair comes into its weekly S1 and monthly pivot, a bounce is possible before another move lower occurs. Resistance is at 1.2965 (weekly pivot, 50-EMA) and 1.3010/20. Support is 1.2800/20 (late-September/early-October swing low), 1.2655/65 (November swing low), and 1.2625 (former yearly low).