The dollar fell hard after the U.S. employment situation was reported Friday morning. The dollar’s rally into the New Year ended abruptly when non-farm payrolls increased by 223K, higher than forecast (200K). The slowing economy and modestly growing U.S. job numbers may have the Fed raising only 25 bps at its next FOMC meeting in February. The yield curve fell, with the 10-year at 3.56% and the dollar fell along with yields. This week, Thursday, the CPI data will be released. Last month the number was 7.1%, down from 7.7% the previous month. The market is looking for another surprise print lower. It is set up for more bond and equity buying. The dollar will fall along with yields if inflation continues to fall.

EUR (1.0650): Volatility late in the week created an extensive range for the single-currency. Many unsuccessful attempts to rally above there within the last several weeks generate an area of stop-losses, accelerating a rally. 1.0420 -1.0667 dealt within three hours! Closing near the high of the day will provide further upside. The main level of resistance is 1.0700. Above 1.0700, the longer-term resistance area is 1.1000. The support for the euro comes back in at 1.0580, then 1.0520.

GBP (1.2110): The sterling’s “yo-yo” week has brought the currency to the middle of its recent range. It is holding firm against the U.S. dollar and the Japanese yen but losing ground against the euro. When this cross-currency trade happens, it is difficult for the pound to make any lasting direction trade. Respecting the technical resistance and support levels is the proper way to trade this. Resistance is at 1.2200 and 1.2250; support is at 1.1850.

JPY (131.70): The yen was another currency recovering from a volatile last week. USD/JPY peaked at 134.77 and looked to have momentum toward 137.00. After the employment report, the dollar plunged, closing the week at 131.95. This currency pair is already trading lower in early trade. 129.50 is the critical area of support. Below this area, a test of 127.00 is expected.

CAD (1.3410): The current theme behind the movement of Canadian dollar comes from the two variables that always control this currency – the value of oil and the differences between the Canadian and U.S. interest rates. Add those up, and the result is a currency with little new ground won or lost. Oil fell to $70/bbl. This put the Canadian dollar under pressure, but as oil rallied into the weekend, the Canadian found strength. With the push and pull, trading the range (1.3650-1.3275) with a bias toward a strengthening Canadian dollar is best.

MXN (19.1500): Finally, USD/MXN has pushed through the 19.35-19.50 support levels. Now, the question becomes, is the 18.7500 level going to hold any further dollar weakness? The Fed is faced with employment data that indicates a less aggressive move at the next FOMC meeting. Banixco has interest rates headed higher, and the recent hikes have widened the difference between the two countries. Demand for those interest rates, i.e., buying pesos, will keep the peso ‘bid’ against the dollar.

CNY (6.7950): The story with the current CNY strength is simple. The Chinese economy is opening up after a prolonged Covid-19 shutdown. Demand for commodities supports their prices, and demand for Chinese goods is strong thus demand for the currency is driving it higher. The key support area is 6.6500. Resistance at 6.8500.