Yesterday a government report showed that the number of U.S. workers filing new claims for jobless aid dropped by 21,000… … last week, while the number of Americans who stay on the benefit rolls increased to the highest level in more than two years.

The U.S. Labor Department reported that the number of Americans filing for
first-time claims for unemployment benefits suggested that the labor market
continued to weaken since the end of 2007. Initial jobless claims decreased to
336,000 last week from a two-year high of 357,000 the week before.

Job growth slowed in December remarkably during the last four months and U.S
Companies only added 40,000 jobs. The ADP report, which was published yesterday,
indicated a reduction of 31,000 jobs in goods- producing industries including
manufacturing and construction companies. Service providers added 71,000 workers and
construction employment dropped by 17,000.
This fact suggests that nonfarm payrolls grew by about 65,000, close to the 58,000
now expected.
Borrowing costs have fallen since the central banks declared a shared effort to
relieve a logjam in interbank lending power on the basis of concerns due to losses
at financial institutions which could possibly slow economic growth. Applications
for loans to buy homes fell to the lowest level in more than four years, while
demand for refinancing loans dropped to the lowest since December 2006.
On the basis of this data, many Forex traders believe that today's Labor Department
report will also show employment slow down, and as we witness, the employment
figures are vital, they represent mainly the housing sector in combination with the
credit markets, from which the U.S. economy still suffers.

The sentiment surrounding the greenback remains negative so it should continue on
its bearish path today, however it could consolidate after its recent sharp
declines. All eyes will be on the NFP report today and we could see some sharp
movement on the back of any surprise.

* EUR
The EUR continued its bullish rampage yesterday and the recent sharp strengthening
of the EUR will once again raise concerns over the state of European exports. The
German economy is one of the key players in the EU and it is heavily reliant on
exports. However the sharp appreciation of the EUR has begun to dampen the German
economy as was seen late last year.
Germany's unemployment rate decreased to the lowest in almost 15 years in December.
Declining unemployment in Germany revealed warning signs coming from Europe's major
economy as it struggles to cope with the EUR's 12% gain against the U.S. dollar over
the past year. German business confidence chopped down to the lowest in almost two
years in December. Retail sales fell for a third month. Nevertheless this negative
news did not really shake up the resilient EUR and we are seeing the 15 nation
currency rally sharply in the New Year.
Germany's unemployment rate was left unchanged at 8.1% in December, as the number of
German citizens without work has reached to just over 3.4 million.
Wednesday's report pushed the EUR down to $1.4373 in European trading, from $1.4409
in late trading Tuesday night in New York.

Businesses in Germany are concerned with the escalating rate of borrowing. Banks are
suspicious of lending to each other, due to uncertainties of loans backed by U.S.
subprime mortgages, and this fact has resulted in a dramatic slowdown in lending to
corporations and individuals.

* JPY
The JPY continued its bullish surge yesterday, driven mainly by the sharp global
carry trade unwind. It reached a five-week high against the EUR and US dollar and it
has been one of the biggest gainers among major currencies in the last few days.
Based on Weak U.S. data, as well as reports on Wednesday of reduction in the
manufacturing sector during the month of December, many investors around the world
began shifting chancy assets due to uncertainties concerning the impact of the
sluggish U.S. economy over the global development. This caused a sharp carry trade
unwind which has not relented since then.
Carry trades involve selling low-yielding currencies like the yen to invest in
higher-yielding currencies. Therefore declines in overseas equities markets since
last week have driven a massive carry trade unwind and hence given a boost up to the
JPY, which hit a 17-month high against the sterling at 213.54 yen on Thursday. In
addition, yesterday the JPY strengthened to as high as 108.25 per US dollar, a point
which has not been seen since November 27.
The Nikkei was down 3.5 percent at 14,771.85, it's lowest since Nov. 22, and the
broader TOPIX index was down 3.2 percent. The strong correlation between falling
equities and a strengthening JPY indicates that the short term direction of the JPY
will heavily depend on the performance of global stocks combined with the level of
risk investors are willing to take.

Technical News
* EUR/USD
The positive momentum is growing stronger, and the 4 Hour chart is showing some room
to run on the bullish side. However the daily chart indicates that we are in
overbought territory with RSI and slow stochastic floating around the 80 level. This
pair should correct slightly before making another surge upwards. Its next bullish
target price will be 1.4800.

* GBP/USD
The cable is continuing to trade in a wide range with a strong signal on the bearish
side. The 4 Hour chart is showing a bearish cross and the dailies are indicating a
solid downtrend in the making. If the cable breaches the strong 1.9700 support
level, we should see it make another sharp freefall.

* USD/JPY
There is strong negative momentum surrounding this pair and it is now floating
around the 122.50 level. The daily chart is bearish and is supported by a bearish 4
Hour study as well. It looks as if the next target price for this pair will be to
breach the all important 109.00 support level.

* USD/CHF
After several attempts to break through the very important support level of 1.1100,
the pair just managed to peak through. However at the moment the pair seems to be
consolidating around the 1.1120. The ongoing momentum is down, as traders should pay
close attention to the 1.1100 level, as if it is breached than a much deeper move
would be imminent.

The Wild Card
* Gold
The bullish momentum is accumulating power, and there is a steady tight upward
channel appearing on the 4 H chart. This commodity may correct slightly before
continuing its steady progression. So
forex traders could maximize their profits by waiting for a dip and then placing a
buy position for a solid longer term trade.

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