The US dollar continued to remain buoyant ahead of this afternoon’s much anticipated payroll numbers, after some conflicting views on the greenback from senior Fed officials.

On the one hand hand Kansas City Fed President Hoenig suggested that the central bank should err on the side of caution with regards to inflation, and act sooner rather than later in raising rates, while St.Louis Fed chief Bullard suggested that the Fed should continue to pump liquidity into the system.

Whatever the views of these two Fed officials the markets will be looking for continued evidence of a turnaround in the jobs market with this afternoons numbers.

Expectations are for no change in December payrolls, with an increase in the unemployment rate to 10.1%. If these figures come in as expected the market should continue to take the dollar higher.

The dollar index is trading around 78 for the moment and a break above 78.20 should target a move towards its 200 day moving average at 78.83.

EURUSD – continues to remain soft on the back of a stronger dollar, along with comments by French Finance Minister Lagarde that she considered the Euro overvalued. The Euro slipped below 1.4300 in Asia and the key support level remains around the previous lows at 1.4215 as well as the 200 day moving average at 1.4250. Trend line support from the lows last month comes in at 1.4280.
It would need a recovery back through 1.4500 to stabilise and take the pressure off the single currency in the near term.

GBPUSD – continues to remain under pressure towards the lower end of its recent range, as the market continues to fret about the lack of any coherent plan to tackle the debt problems of the UK.
Even with UK PPI data at 9:30GMT today sterling weakness remains the dominant theme. A test of the October lows continues to look increasingly likely while debt fears remain. Resistance at 1.6070, and the range highs at 1.6240/50.

EURGBP – a high of 0.9025 yesterday proved to be unsustainable and the 0.9020 resistance level remains intact. The market is still playing the overall range of the last few weeks. A break of 0.9020 targets 0.9070 while a break of 0.8830/50 would target 0.8700.

USDJPY – A high today of 93.75 in Asia continues to signal the potential for a move towards 95.10, despite Japan’s new Finance Minister back-tracking on his weaker yen comments yesterday, after an apparent rebuke by the Japanese Prime Minister, saying that currency movements ought to be determined by the markets. The dollar needs to hold above 92.80 initially, but more importantly 91.20.