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The pair ventured below 0.89 overnight to a low of 0.888 and is currently just holding at 0.89 heading into today’s key jobs numbers. We’ve already seen the pair lose quite a bit of ground after trading back above 0.90 earlier in the week. Bias remains skewed to the downside and should jobs data disappoint today, we could see the pair break overnight lows and head towards December lows. At the same time, should the data come in better than expected, I still feel traders will take advantage of the strength to sell the pair. The unemployment rate is expected to remain steady at 5.8% with 10,300 jobs added.
The greenback remains in a solid position with potential for further near term gains helped by tapering talk ramping up. Encouraging comments from the Beige Book about the US economy and a much better than expected Empire State manufacturing index reading kept the momentum going for the USD. Comments by Fed member Charles Evans, who is considered a dove, also made quite an impact. Evans said it makes sense to continue taper in January which reinforces the rhetoric we’ve been hearing from other Fed members. With that in mind, USD/JPY is likely to continue running higher. There is a bit of data due out of Japan today including core machinery orders and tertiary industry activity. Any misses will just enhance the case for a weaker yen.
With gains in the USD likely to continue in the short term, there is a good chance we will see the precious metal tapering off. Gold dropped the most in a week and is now just hanging around 1,241. In US trade later today we have unemployment claims and comments by Ben Bernanke to look out for. This could be a source of further volatility for gold.
The miner rallied yesterday on the back of an impressive 4Q output report. Today will be an interesting test for OZL shares as they have to contend with profit taking pressure. We might also receive some broker ratings changes for the stock as the session progresses.