Friday, May 05, 2006 8:15 AM ET Non-Farm Payrolls is expected to be strong with +200k reading, but the general market consensus is that anything less than +300k will not be enough to reverse the current lower dollar trend. I am going out on a bit of a limb here for this data release and will attach some numbers to EUR/USD levels. Should be see anything greater than 250k we could see a pullback to 1.2625 support level in EUR/USD, which could be viewed as a buying opportunity. Anything less than 250k and we are likely headed to the 1.1618 ext at 1.2775. I will update this trade after the release.

EUR/GBP remains well bid after we went long yesterday and we will be looking to reestablish long positions after the release. If you held overnight, tighten up those stops through the release.

EUR/JPY is an interesting chart that has shown strength after the 144 gap fill into 145 resistance. More commentary about this setup will follow the release, but we look to get short EURJPY just under 145.00

POST NFP Update 9:34 AM EST After a disappointing 138k jobs added in April, we find ourselves at a curious juncture here in terms of the dollar. EUR/USD's initial reaction of a 50-point gap higher towards the 1.618 Fib extension at 1.2775 was expected, but what was unexpected was the lack of follow through once 1.2765 traded. USD/JPY and our EUR/JPY mentioned above got absolutely melted, but there were rumors of Japanese-specific news that led to the 150+ buying spree of yen. A heavily offered EUR/JPY helped contain EUR/USD on the topside, but what was interesting was USD/CHF's similar lack of follow-through. USD/CHF traded only briefly below September 2005 lows of 1.2241 before rallying back in a rather feeble manner. It really feels like the dollar sellers might be getting tired.

The daily chart of the US dollar with the 10-year bond yield overlaid illustrates two possible reasons for a potential dollar bounce. First, the DXC traded to an exact 85.00 low before bouncing off the daily .618 retracement of the entire 2005 and 2006 Dollar uptrend. Second, a massive divergence between the dollar and bond yields grows larger with every passing day of lower dollar and lower bond prices. This divergence will likely need to be resolved.

Neither of these points is reason enough to start buying dollars, so consider it just a heads up. Plus, playing long-term trend reversals on the intraday time frame is usually an exercise in extreme futility. The market will send so many head fakes your way that you would think Michael Jordan was driving the lane. We must respect the long term trend until otherwise broken. EUR/USD 1.618 extension at 1.2773 remains target #1 and the beginning of a large zone of daily resistance starts at 1.2815. USD/CHF, while below 1.2240, is a sell targeting the 1.618 Fib extension of the Sept 2005 1.2240 low to the November 2005 1.3282 high at 1.2135. USD/JPY is testing the 2005-06 uptrend channel support at 112.50. Below that and 1.0 projection from the November 2005 high falls in at 111.50, which is a level I have been watching for months.

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

Disclaimer
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.