EURUSD Trades In Tight Range Ahead of the US January Unemployment Report Later Today

• USD falls on Fed Chairman Ben Bernanke’s comments yesterday before the House budget committee but later regains ground after chairman assures politicians that he will not sacrifice inflation control for growth
• EURUSD trades in tight range in Asia overnight ahead of the US January unemployment report later today
• Gold slips back a little after making fresh 2012 highs above $1760 yesterday
• USDJPY once again remains locked in a tight range overnight despite renewed analysts calls for a test of the 75, no one seemingly wants to yet prompt the Bank of Japan into action
• European equities open in slight negative territory as all markets generally quiet in early trading

Good morning. Well yesterday was another rollercoaster out there. The EURUSD was coming back down in the morning, looking to test the 1.3115 base line, that I previously mentioned to you in the update, when comments from Chinese premier Wen sent the price from 1.3125 to 1.3195 in the blink of an eye.

He said that China was studying and considering ways to invest in the ESM and the EFSF. Well that comment was probably to appease German chancellor Angela Merkel who was in China (no doubt with her PIIGS begging bowl in hand), because no sooner did that statement cross the wires when another remark helped send the price all the way back down again, as Wen said that in order for China to make such moves, Europe would have to seriously get its act together – ergo not much chance China will actually do anything at all then?

Then later in the morning, the price was already slipping, when EU commissioner Olli Rhen said that there were significant problems in resolving the Greek PSI deal.

I am not going to repeat what I have said about all the twaddle coming from Greek quarters on this issue in recent weeks, but I think their ministers have seriously lost what little credibility they had left as result of all the hollow assurances they have been making regarding PSI deals being ‘imminent’.

The upshot of that dose of reality from Rehn was that the price fell rapidly back from 1.3140 to 1.3085 before it recovered once again into the afternoon, ahead of Fed chairman Ben Bernanke’s testimony before the House budget committee.

As the fed chairman started answering questions the Dollar fell on his remarks concerning the health of the economy and his concerns regarding structural weakness and the robustness of the current recovery.

Bernanke may be a realist in this regard, but he never ceases to underperform when it comes to looking for excuses to get the printing presses ready again.

Well the upshot was the EURUSD moved quickly back to 1.3185 in another tedious lurch which blew out almost as soon as it started, sending the price back to 1.3135 after Bernanke later assured politicians that the Fed would not sacrifice price stability for growth; meaning that they will reign in on inflation if needed.

Asia has seen a very tight range overnight in most currencies. The EURUSD did fall back to test the base line at 1.3115 and has been as high as 1.3157 ahead of the European opening.

Today the main event is the release of the US January unemployment report. Ahead of that at 10am we have the December Euro Zone retail sales data.

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The calls for the US numbers are as follows – the underlying rate of unemployment is expected to remain unchanged at 8.5% with non-farm payrolls increasing by 140,000 from last month’s 200,000 number.

Private payrolls are expected to show a 160,000 gain from the previous 212,000 number and manufacturing payrolls are expected to increase by 13,000 from a previous 23,000.

Once again I will remind you of the importance of the latter numbers in terms of a more accurate assessment of how sustainable this current recovery is.

It is also important to watch for any significant revisions to any of the numbers seen last month.

The current price action in the majors has been really rather quiet overnight as the EURUSD and all the major EUR crosses trade sideways since last night.

There is a potential mini inverse head and shoulders forming on the EURUSD which would likely be negated underneath 1.3020 and confirmed above 1.3230.

Therein lies the likely range, barring and significant fresh news, ahead of the US December payroll report at 1.30pm.

The GBPUSD managed to take out stops under 1.5790 last night as it dipped briefly under the 1.5790 break out level from earlier in the week.

That helped EURGBP flip its earlier move yesterday as stops were removed there under 0.8280 before it snapped back to trade as high as 0.8330 before doing it too fell back under 0.8300 again before lifting yet again into this morning’s session.

Whilst the whole market looks pivotal there is a degree of pressure on the Dollar index still and that is helping the commodity currencies remain near the upper end of the recent ranges.

They are also being assisted by gold which remains firm, currently at or near fresh 2012 highs helped by the degree of uncertainty which is currently impacting the markets generally.

To sum up then we have this very pivotal price action across the board as the markets await further developments, which may come from direct action by the BOJ or the SNB or fresh news out of the EU in addition to the US data later today confirming or doubting the sustainability of the US recovery.

Despite the market looking to test the resolve of the SNB or the BOJ it doesn’t seem to me like there’s much appetite in truth to do this.

The current lower USDJPY and EURCHF seems to have more to do with stale position removal more than anything else.