Fresh damage ensued in the dollar today after US jobs grew by a disappointing 112K in November, following a revised 303K increase in October. The tepid job growth was the lowest since July, thus throwing cold on last month’s strong labor report. The unemployment rate fell back to 5.4% from 5.5%, while average hourly earnings rose 0.1% from a revised 0.3%. An aggregate of 54,000 jobs was revised down in September and October.


For more details on the Jobs report, the dollar and the Fed, please see latest articles and ideas on Forexnews.com

The blow to the dollar was especially severe as it damaged the currency’s fragile attempt to recover yesterday. The labor report propelled the EURUSD by 2 cents to a fresh all time high of $1.3460, while knocking 1.5 yen from the dollar to 102.04. Sterling gained 2 cents to $1.9428, 10 pips short of Thursday’s 12-year high.

The dollar's slump was also highlighted by is its inability to rally in the face of Four explosions in Madrid, Spain, which were reported to be the work of Basque separatist group ETA. None of the explosions resulted into reported casualties. The rationale of the euro’s failure to sell-off was attributed to the fact that the bombing was not carried out by Al Qaeda, a group which has been seen by many as the main cause of geopolitically threatening news that are eventually dollar negative.

A stronger than expected services ISM survey at 61.3 in November, following a 59.0 reading was hardly noticed in the midst of the payrolls-dollar storm. The emloyment index slipped to 55.0 from 55.8, while the new orders index fell to 59.9 from 60.5.
Oil prices continued their decline, as WTI oil futures shed full dollar to $42.02, reaching their lowest level since August 31. The decline continues to be a combination of relatively warm temperatures and OPEC’s willingness to raise production as signaled by Saudi Arabia, the cartel’s leading producer. The larger than expected build up in US heating oil inventories was the initial catalyst to the move. But it will be interesting as to whether OPEC will agree on a supply hike at its meeting on Friday.

Fed & Treasuries

The 10-year lost about 15 bps to 4.26% following the disappointing labor report, while the yield on the 2-year dropped 8 bps to 2.92%. Today’s jobs report does not alter the expectation of a 25-bp Fed hike for this month. Although the Fed’s favorite inflation measure of PCE core price index remained stable at 1.5% in the year ending in October--below the implied target of 2.0%-- the Federal is watchful of the potentially inflationary impact of falling oil prices. Since a continued decline in oil prices is expected to ease restraint on corporate and consumer spending, we believe the Fed’s tightening to be well warranted ahead of a backup in aggregate demand. The situation is cogently highlighted by this year’s developments when oil prices more than doubled over the past 6 months, while the 10-year bond yield fell 18% over the same period. Thus, as rising oil’s contractionary impact on the economy being gradually removed, the Fed can continue to remove its policy accommodation. Accordingly, we see the fed funds rate topping at 3.00% by end of 2005.

EURUSD soars 2 cents to $1.3460

With the euro nearing the key $1.35 level, deemed as the 1.4478 low in USD/DEM attained in Summer 1995, there is rising speculation of a possible intervention by the European Central Bank. This could take the form of more aggressive jawboning next week, of which we think the ECB is perfectly capable. Tuesday’s ZEW survey from Germany is expected to show further deterioration in economic sentiment, but that would only engender a euro decline in the event that the currency has tapered off following rising signs of concerns.

Failure from the ECB to intervene verbally or operationally by Monday trade could extend the pair to $1.3495-00, before derivatives stops pressure it back towards the $1.3430s. Support could extend $1.3370 and 1.3300. Upside capped at 1.350, 1.3530 and 1.3355-60.

USDJPY tests 102

Despite the yen’s 11-day decline in the yen against the euro, the Japanese currency has dragged the dollar towards the key 102 level, with little warning from Japanese authorities. Support stands at 101.80, followed by the 101.28 low of December 2000, which had not been attained since 1995. Upside capped at 102.45-50, followed by 103.30 and 103.55-60. Only intervention-driven buying could sustain the pair towards 104.30.

Sterling regains $1.94

Sterling pared all but 10 pips of Thursday’s 2.3 cent drop, but failed to hit a fresh 12 year high as EURGBP regained the 69.20 pence level. Should the euro momentum overcome sterling’s rally--more recently a result of BoE Governor Kong—cable’s fortunes may become more limited.

We see support starting at $1.93, followed by $1.9230 and $1.91-- the 38% retracement of the $1.8523-1.9438 move. Key foundation stands at the previous high of $1.9035-40. Resistance stands at $1.94, followed by 1.9430 and 1.9460.

CAD unconvinced by Canadian jobs

The loonie shrugged the weak US labor report mainly thanks to a lukewarm 4.6K rise in November jobs, following a 34.3k increase. Economists had expected a rise of as much as 30K. The unemployment rate stood unchanged at 7.1%. The report reduces the likelihood of the bank of Canada raising interest rates next week, which could generate fresh interests in USDCAD towards1.2050.

USDCAD sees resistance 1.2030, followed by key pressure at capped at the 1.2065-70 high of November 19. Subsequent pressure seen at 1.2100. Support held at 1.19, 1.1850 and 1.1750.

At 7:00 AM Canada November Unemployment Rate (exp 7.1%, prev 7.1%) Canada November Change in Employment (exp 30.0k, prev 34.3k) At 8:30 AM US November Unemployment Rate (exp 5.4%, prev 5.5%) US November Non-farm Payrolls (exp 200k, prev 337k) At 9:30 AM US Philadelphia Fed’s Santomero Speaks (exp n/a, prev n/a) At 10:00 AM US November Services ISM (exp 59.0, prev 59.8)

Currency traders took to the sidelines overnight with markets holding off until the release of the US November labor report, scheduled for 8:30 AM EDT. The dollar maintained its buoyant tone against the majors, as the currency continued to recover from its steep sell-off of recent weeks. The euro failed to overcome the 1.33-level, while the dollar/yen pair remained supported above the103-mark.

In the coming session, Forexnews expects non-farm payrolls to rise by as much as 290K-300K, well above the consensus forecast of 190-200K, while we see the unemployment rate slipping to 5.4% from 5.5%. We expect the NFP reading to be led by another month of strong employment creation in the services sector of about 275-85K, and net positive creation of jobs in manufacturing from a loss of 5K in the prior month. We see construction jobs to reverse some of the strong 75K in October, which largely emerged as a result of post-Hurricane rebuilding in the Southeast. The tepid showing of weekly jobless claims also suggests that layoffs have neared a trough as the 4-week average of weekly drifts at 4-year lows.

Cable Steady Near 1.92

Cable traded within a narrow range, briefly dipping beneath the 1.92-level overnight. UK Chancellor Gordon Brown said that forex imbalances between the euro and the dollar are contributing to an uncertain global economic outlook. Furthermore, he feels there is still a great deal of uncertainty in the global outlook. However, he was optimistic about the UK’s growth prospects for the coming year.

Separately, UK’s CIPS/Reuters services PMI edged up to 56.7 in November, up from 56.3 a month earlier, its highest reading since August. The new business index improved to 56.8, from 56.4, while the employment index improved to its best level since March 2001 at 53.8, from 52.6.

Cable holds steady above the 1.92-mark, with resistance seen at 1.9245, backed by 1.9280 and 1.93. Subsequent ceilings are eyed at 1.9340, followed by 1.9370 and 1.94. Meanwhile, support beneath the 1.92-handle starts at 1.9175, followed by 1.9130 and 1.91. A move lower will target 1.9065, backed by 1.9040 and 1.90.

EURUSD Stalls at 1.33

Eurozone November services PMI dropped to 52.6 in November, it’s lowest reading since August 2003, and down from 53.5 in October. The employment index drifted lower to 50.5, down marginally from the previous month at 50.9. The expectations component slid to 61.4, down from 62.2, posting its lowest reading since March 2003. Separately, Eurozone retail sales edged up 0.7% m/m, but slipped 0.2% y/y.

The euro remains mired beneath the 1.33-level, with support starting at 1.3270, followed by 1.3230 and 1.32. Subsequent floors are seen at 1.3170, backed by 1.3140 and 1.31. A move past 1.33 will target 1.3340, followed by 1.3370 and 1.34. Subsequent resistance is eyed at 1.3440, followed by 1.35 and 1.3530.

USDJPY Buoyed Above 103

Japanese government officials continued their attempts to jawbone the yen lower, reiterating their ongoing vigilance against rapid forex moves and their readiness to act against volatility. Meanwhile, the BoJ’s Mizuno discussed monetary policy, saying its purpose was being fulfilled. He sees risk that asset prices to turn volatile when credit tightens, and that the Bank should maintain its current framework until set conditions are met. Mizuno also said it was not possible for the BoJ to have both quantitative easing and interest rate policy.

Earlier data showed Japan’s capex up 14.4% y/y, with firm’s reporting Q3 recurring profits up 37.8% y/y. Sales for the same period were up 5.7% y/y.

Resistance is seen at 103.50 followed by 103.80 and 104. Additional resistance is seen at 104.20, followed by 104.70 and 105. Support starts at 102.65, followed by 102.20 and 102. Subsequent floors are seen at 101.70, followed by 101.40 and 101.

AUDUSD

Resistance is seen at 0.78, followed by 0.7850 and 0.79. Additional ceilings are seen at 0.7940, followed by 0.7970 and 0.80. Losses will target support at 0.77 and 0.7660. Subsequent floors are seen at 0.7620 and 0.76.

The dollar ended well off its lows of the day amid unwinding of shorts ahead of tomorrow’s November labor report from the US, which traders are expecting top produce another strong performance (more on this below). After hitting a fresh all time lows against the euro and 5-year highs against the yen in early European trade, the dollar pushed higher during the remainder of the Euro session, only to be briefly interrupted by a larger than expected 25K rise in weekly jobless claims. But the dollar’s shorts were further unwound after US factory orders grew 0.5% last month beating estimates of a 0.2% rise, following a flat reading in the prior month. October durable orders were revised to a 1.1% decline from a previously reported 0.4% decline.

Oil prices lost another $2.00 reaching $43.30s per barrel as speculators added to yesterday’s sell-off, which resulted from a larger than expected build up in US heating oil inventories. Oil Stocks rose 2.3 million barrels last week, defying expectations of a 1.4 million barrel rise. Saudi Arabia’s willingness to raise daily production to as much as 12 million barrels has also helped stabilize the situation.

The 10-year Treasury note hit a fresh 3-month high at 4.39% on a combination of increased talk that the Fed may be growing less sanguine with inflation. Wall Street Journal reporter and prominent Fed watcher Greg Ip’s article cited that “A growing number of Federal Reserve officials believe inflation risks are on the rise -- a shift in sentiment that will likely keep the central bank raising interest rates at its next few meetings”. We also believe that a continued decline in oil prices would boost the economy by easing the restraint on corporate and consumer spending, thereby allowing the Fed to extend its tightening process.

Another Upward Surprise in Non-farm Payrolls

We expect non-farm payrolls to rise by as much as 290K-300K, well above the consensus forecast of 190-200K, while we see the unemployment rate slipping to 5.4% from 5.5%. We expect the NFP reading to be led by another month of strong employment creation in the services sector of about 275-85K, and net positive creation of jobs in manufacturing from a loss of 5K in the prior month. We see construction jobs to reverse some of the strong 75K in October, which largely emerged as a result of post-Hurricane rebuilding in the Southeast. The tepid showing of weekly jobless claims also suggests that layoffs have neared a trough as the 4-week average of weekly drifts at 4-year lows.

Likely Dollar Impact

Unlike last month when the explosive rise in October payrolls to 338K failed to help the dollar, we expect more dollar response from a strong figure tomorrow. A reading of at least 235-50K would be evoke a positive reaction in the dollar, while a reading along our forecast of 290-300K could drag the euro down to $1.3170-80 and lift USDJPY to as high as 104. We justify such a reaction from the recent slight up-turn in dollar momentum as speculators take profits off the table, as well as the oil drop.

Indeed, EUR net longs last week dropped 40% to 32,261 contracts, posting the second consecutive weekly decline, while Aussie net longs fell to 30,629 contracts. CHF net longs broke a 4-week consecutive rise slipping 5% to 38,786 contracts after hitting a 5-year high the prior week. JPY net longs fell 26% to 33,198 contracts, backing off from their 13 month high. CAD net longs fell for the third straight week, down 12% to 29,471contracts.

Euro Drops Ahead of NFP as Trichet Remains Restrained

The euro pushed lower after the ECB president JC Trichet confirmed that the Bank has cut its forecasts for 2004 and 2005 Eurozone growth, while raising its forecast for 2005 inflation. Trichet said the central bank expects 2004 growth at 1.8% from a previously forecasted 1.9% growth, and 2005 growth at 1.9 % from a previously forecasted 2.3%. The ECB confirmed raising its 2005 inflation forecast to 2.0% from 1.8 %, with 2004 inflation projection left unchanged at 2.2%.

On the subject of intervention, Trichet stuck to the script of not commenting on intervention publicly, seeking to dampen yesterday’s comments from the Japan Vice Fin Min Watanabe indicating possible coordinated intervention between Europe and Japan. We stress that Trichet’s reluctance to comment on intervention does not reduce the possibility of intervention and only reflects the central banker’s cautious rhetorical approach.

Despite Trichet’s relative silence of matters of intervention, his comments sounded less hawkish than at the November 4 conference, when he said “inflation to remain significantly above 2% in coming months” blaming oil prices as having a “direct impact on inflation”. Today, Trichet said there were “no indications of underlying inflation picking up”. Such change of tone may have been intended at stabilizing the currency rise as it nears the $1.35 level, which is equivalent to the DEM 1.4487 low in the USD/Deutsche mark rate attained in summer 1995 (rounded off to DEM 1.45 in the USD/DEM rate).

We see EURUSD support extending to 1.3230 followed by 1.3170-80 at which stability could emerge. A figure less then 140-50K should prop the euro back to the $1.3325-30, with accumulated gains to face pressure at 1.3370-75.

Japan Sticks to Concerned Tone

One day after Japan hinted at a possible "harmonized action" with Europe to stem speedy dollar declines, officials maintained that both Japan and Europe shared concerns with the recent dollar moves. We do not rule out dollar buying by Japanese authorities ahead of tomorrow’s non-farm payrolls.

USDJPY upside seen initially capped at 103.65-70, with increased buying capped at 104. Only BoJ-driven buying along with a +275K NFP could lead to 104.30. Support stands at 102.60, followed by 102.45-50, a break of which could trigger downside all the way top 101.80. Subsequent target stands at the 101.30 low of Dec 2000, which raises chances of an intervention by the Bank of Japan.

Sterling Vulnerable to Intra-day Correction

Shrugging a haughty 2005 GDP forecast of 3.0-3.5% by Chancellor Gordon Brown, sterling joined the retrenchment in the major currencies against the dollar on a combination of partial liquidation of dollar shorts and cautiousness ahead of tomorrow’s NFP report.
A NFP report of at least 275K could drag GBPUSD to initial support at $1.91 and towards the 38% retracement of the $1.8523-1.9438 move. Key foundation stands at the previous high of $1.9035-40. Resistance stands at $1.9330, followed by $1.9360. Toppishness stands at $1.94.

CAD Turns to Canadian Jobs Report

USDCAD rose to a 1-week high at 1.1550 on a combination of a general bounce in the greenback and a $5 accumulate sell-of in oil, which is a negative for Canada’s oil receipts. Canada’s finance minister Ralph Goodale reiterated his concern over the impact of the strengthening CAD but deemed it as a reception of the nation’s improved productivity.
Aside from tomorrow’s key US job report, CAD traders await Canada’s November employment figure expected to show a 30K rise from 34.3K reading in October. The unemployment rate is seen unchanged at 7.1%.
We see upside capped at 1.1590-95, followed by 1.1630. Support seen at 1.1475 and 1.14.

At 8:30 AM US Weekly Jobless Claims (exp 330k, prev 323k) At 10:00 AM US October Factory Orders (exp 0.3%, prev –0.4%) At 12:00 PM Fed Governor Bernanke Speaks (exp n/a, prev n/a)

The dollar recovered in London trading, after tumbling earlier in the session to a new 12-year low versus the sterling at 1.9438, a fresh record low against the euro at 1.3384 and a 4 ½ low against the yen at 101.86. Speculation on the possibility of bilateral intervention from the ECB and the BoJ helped pick the dollar up off its lows.

With the key US labor report looming tomorrow, traders may square some profits ahead of the release. Meanwhile, data slated for release today will see weekly jobless claims, and October factory orders – both of which are unlikely to significantly impact the markets. Also on tap is Fed Governor Bernanke’s speech, scheduled for 12:00 PM.

Cable Backs Away from 1.94

Cable relinquished gains posted earlier in the session, which saw the pair climb to a fresh 12-yr high above the 1.94-level to 1.9438. Profit taking pushed the pair briefly beneath the 1.93-level in London.

Cable trades near 1.9340, with resistance eyed at 1.9370, followed by 1.94 and 1.9440. A move higher will target 1.9480, backed by 1.95 and 1.9530. Support starts at 1.93, followed by 1.9280 and 1.9240. Subsequent floors are seen at 1.92, followed by 1.9175 and 1.9130.

EURUSD Extends to New High

The euro quickly backed away from its new record high hit early last night at 1.3384, drifting toward the 1.33-level. Meanwhile, economic data released included Eurozone PPI and Germany’s labor report. Eurozone PPI edged up slightly 0.7% m/m and 4.0% y/y. Separately, Germany’s November jobless rose 7,000 m/m to 4.464 mln, with the unemployment rate up to 10.8% -- its highest since December 1998.

Also due out will be the ECB's monetary policy decision, in which no change is expected. Markets will focus on the subsequent press conference to gauge when and where the Bank's next move will be.

The euro is buoyed above the 1.33-level, with resistance eyed at 1.3340, followed by 1.3370 and 1.34. Subsequent resistance is eyed at 1.3440, followed by 1.35 and 1.3530. Support begins at 1.33, followed by 1.3270 and 1.3230. Additional floors will emerge at 1.32, followed by 1.3170 and 1.3140.

USDJPY Breaches 102

Dollar/yen dipped to its lowest level in 4 ½ years beneath the 102-level, but quickly rebounded back above toward 102.50. Japanese government officials have stepped up their efforts to talk down the yen, with hints at bilateral intervention along with the ECB. Although Japan FinMin Tanigaki declined to comment on the possibility of joint intervention, it is clear there have been discussions between the two central banks. He added that the dollar’s fall versus the yen has been very rapid and would continue to monitor closely. Vice FinMin echoed a similar message saying that Japan shares concerns over rapid forex moves with other authorities, and is always in contact with them on forex.

Support for USDJPY is eyed at 102.20 and 102. Subsequent floors are seen at 101.70, followed by 101.40 and 101. A move back above 103 will target resistance at 103.35 followed by 103.80 and 104. Additional resistance is seen at 104.20, followed by 104.70 and 105.

AUDUSD

Resistance is seen at 0.78, followed by 0.7850 and 0.79. Additional ceilings are seen at 0.7940, followed by 0.7970 and 0.80. Losses will target support at 0.77 and 0.7660. Subsequent floors are seen at 0.7620 and 0.76.

US manufacturing activity rose in November as the manufacturing ISM index rose to 57.8 from 56.8 in October, defying estimates of a 57.0 reading. The improvement was broad-based with the new orders and employment indices both rising; to 61.5 from 58.3 and to 57.6 from 54.8 respectively. Also on a positive note, the prices paid index slipped to 74 from 78.5, tempering inflationary nervousness, which arose from yesterday’s release of the Chicago PMI price index hitting a 14-year high at 89.8.

On the consumer front, US personal spending rose 0.7% in October following a 0.2% rise in September, while incomes increased 0.6%, after rising 0.2% in September. This pushed personal savings down to 0.2% of disposable personal income, its lowest level since October 2001. This consumer spending news proved positive compared to yesterday’s disappointing consumer confidence index, which fell for the 4th straight month, hitting an 8-month low.

The Fed’s Beige Book had a mostly mixed assessment when it reported continued US economic growth from mid Oct to mid Nov in a number of regions. Consumer spending remain uneven with flat or slower sales in many regions. Higher activity in manufacturing and services sectors, while labor markets show continued improvement in the past weeks. Wage pressure was reported to be subdued in most areas.

Oil prices slump by more than $3.00

Oil prices fell by more than $3.50 to $45.49 per barrel amid a larger than expected build up in US heating oil inventories. Oil Stocks rose 2.3 million barrels last week, defying expectations of a 1.4 million barrel rise. of Saudi Arabia’s willingness to raise daily production to as much as 12 million barrels has also helped stabilize the situation. The oil slide was the main catalyst to the 1.9% rise in NASDAQ and the 1.65% rise in the Dow and the S&P500.; But the dollar tumbled to fresh 9-year lows in trade-weighted terms at 81.30, underlying the negativity surrounding the currency.

Euro shrugs growth downgrade

The euro’s record-breaking run was not hampered by talk of an ECB downgrade of Eurozone growth. An ECB source that remained unidentified said the ECB revised its growth forecast to 1.9% next year from its previous 2.3% forecast. Traders should look for a confirmation/mention of this forecast in tomorrow ECB governing council meeting.

At tomorrow’s press conference (8.30 am NYT), we expect the JC Trichet to reiterate his vigilance against inflation, while admitting a retreat in activity. Whether he will confirm the aforementioned downgrade in growth or not, Trichet’s comments aren’t expected to alter the euro’s course as he will refrain from shedding any meaningful insights on the likelihood of any currency intervention.

With resistance pushing up to 1.3350, followed by 1.3375, after which traders are likely to back down towards 1.3320 out of cautiousness ahead of Friday’s US labor report. Subsequent support follows at 1.3280 ands 1.3230.

Yen ignores MoF intervention hint

Japanese Ministry of Finance resorted to new ways of jawboning when vice finance minister for international affairs Hiroshi Watanabe said Japan and Europe could take "harmonized action" to stem the appreciation of their currencies. The ECB’s reiterated that it did not comment publicly on interventions. We reiterate that the BoJ will unlikely intervene as because the yen’s appreciation versus the dollar is largely a result of dollar weakness and not yen strength. See our charts in the latest forexnews article. The yen is relatively stable against the euro, sterling and Australian dollar.

See our piece on the Bank of Japan and the euro in Articles & Ideas.

Support stands at 102.45-50, a break of which could trigger downside all the way top 101.80. Subsequent target stands at the 101.30 low of Dec 2000, which raises chances of a intervention by the Bank of Japan. Resistance starts at 103.25-30, followed by 103.75-80. 104 remains as key obstacle.

Cable soars past $1.93 on PMI, King

An unexpectedly strong manufacturing PMI survey from the UK combined with Mervyn King’s bullish comments yesterday, paved the way for another 2.5-cent rally in cable towards a fresh 12-year high of $1.9334. Britain’s manufacturing PMI jumped to its highest level since July at 55.0, beating both last month’s figure at 53.5 and consensus forecasts of a dip to 52.5. This was the survey’s 17th straight time above the key 50 level, denoting a contraction and an expansion.

Yesterday’s comments from Bank of England governor Mervyn King indicating the potential trade advantages emanating from sterling’s decline against the euro were the big catalyst to the latest run-up. King said: "The pound doesn't pose major competitive problems now and I do think that with the adjustment, that (the trade deficit) may come down". With King practically ignoring the impact of sterling’s rise versus the dollar, traders interpreted the King as unruffled by the rise GBPUSD.

Breaking the key $1.9140 level past $1.93, cable could extend to $1.9360, before retreating to as low as 1.9050 as early as tomorrow. Support follows at 1.9020 and 1.8870.

Aussie edges up after GDP disappointment

Aussie continued its slump after Australia's Q3 GDP growth slowed 0.3% from 3.0% in Q2, hitting its lowest level ion 3 years. Economists had expected a 0.5% rise. The sluggish reading casts doubts on a December rate hike from the Reserve Bank of Australia.
Aussie sees interim resistance at 78.25-30, followed by 78.60 and 78. 90-00. Key support starts at 77.45, followed by 76.80

At 8:30 AM Canada October Industrial PPI (exp 0.2%, prev –0.6%) US October Personal Spending (exp 0.5%, prev 0.6%) US October Core Price PCE Index y/y (exp 1.5%, prev 1.5%) US October Personal Income (exp 0.5%, prev 0.2%) At 10:00 AM US October Construction Spending (exp 0.7%, prev 0.0%) US November Manufacturing ISM (exp 57.0, prev 56.8) At 2:00 PM US Fed Beige Book Survey (exp n/a, prev n/a) At 2:10 PM SF Fed’s Yellen Speaks

Sterling remained the favored currency among traders overnight, climbing sharply across the board. The pound shot up to its highest level in over 12-years against the dollar at 1.9248 in London trading. Meanwhile, the greenback continues to extend to new record lows against the euro, slipping to 1.3334, and also mired beneath the 103-level versus the yen.

Traders will have several key reports to digest in the coming session, with the US release of November manufacturing ISM taking the headlines today. Markets are forecasting a slight increase to 57.0, up from 56.8 in October. It will be interesting to see whether a better than expected number will provide support for the dollar against sterling, which tumbled sharply overnight following a surge in UK manufacturing.

Cable Rockets to 12-yr High

The sterling soared to its highest level in over a decade, rising to 1.9260 on a combination of robust UK economic data, and yesterday’s upbeat comments from BoE Governor King. Earlier in the session, UK’s CIPS/Reuters manufacturing PMI jumped to its highest level since July at 55.0, beating both last month’s figure at 53.5 and consensus forecasts of a dip to 52.5. The output index rose to 57.2, while the new orders component edged up to 55.1. The unexpectedly strong UK manufacturing data provided additional fuel to propel the sterling to a 12-yr high versus the greenback.

Cable maintains its bullish tone, holding near 1.9260. Resistance starts at 1.93, followed by 1.9330 and 1.9370. Subsequent ceilings are seen at 1.94, followed by 1.9440 and 1.95. Losses will find interim support at 1.93, followed by 1.9280 and 1.9240. Additional floors will emerge at 1.92, followed by 1.9175 and 1.9130.

EURUSD Edges Fresh High

The euro edged up to a fresh record high at 1.3334, despite a weak set of data released earlier in the session. The Eurozone manufacturing PMI came in worse than expected, slipping to 50.4, lower than forecasts of 52.0 and October’s 52.4 reading. The new orders component dropped beneath the key 50-level for the first time since July 2003, while the output index tumbled to 50.4, which marked its largest monthly drop since Oct 2001.

Separately, Eurozone GDP grew by 0.3% q/q and a downwardly revised 1.8% annually. The European Commission forecasted an unrevised Q4 GDP at 0.2%-0.6% q/q. Meanwhile, the unemployment rate stood unchanged for its 20th consecutive month, holding steady at 8.9%.

The euro is buoyed above the 1.33-level, with resistance eyed at 1.3340, followed by 1.3370 and 1.34. Subsequent resistance is eyed at 1.3440, followed by 1.35 and 1.3530. Support begins at 1.33, followed by 1.3270 and 1.3230. Additional floors will emerge at 1.32, followed by 1.3170 and 1.3140.

USDJPY Steady Below 103

Government officials continued their jawboning overnight, but with little results as the dollar/yen pair remained beneath the 103-level. Japan FinMin Tanigaki reiterated calls to take action against unusual forex moves and that rates do not accurately reflect fundamentals. He added in addition to Japanese officials, other foreign authorities were also monitoring FX. Japan MoF’s Watanabe, attempting to threaten the yen lower, said that Japan and Europe could take bilateral action on forex. He said that Japan would take firm steps on rapid forex moves, and was monitoring cautiously. Furthermore, he added that he would keep in mind the cost-efficiency for any possible intervention.

Support for USDJPY starts at 102.65, followed by 102.20 and 102. Subsequent floors are seen at 101.70, followed by 101.40 and 101. A move past 103 will target resistance at 103.35 followed by 103.80 and 104. Additional resistance is seen at 104.20, followed by 104.70 and 105.


AUD Sluggish

The Australian dollar again fell to 0.77 overnight, as the pair failed to penetrate above the 0.78-mark. Australia Treasurer Costello said the outlook for the economy was positive, and expected export growth to improve in the coming period. He feels that the prospects remain favorable, adding that consumption was still quite strong, along with consumer confidence.

Resistance is seen at 0.78, followed by 0.7850 and 0.79. Additional ceilings are seen at 0.7940, followed by 0.7970 and 0.80. Losses will target support at 0.77 and 0.7660. Subsequent floors are seen at 0.7620 and 0.76.