We just missed our 119.05 fill as the market made a 119.05-09 low at 7:30 a.m. EST, before moving up into the mid-thirties. If you jumped the gun and put on our USD/JPY trade, I would recommend bailing out with a small profit. I think the upside potential is very limited due to the Yen crosses, including EUR/JPY, which came under heavy pressure last night. Further, EUR/USD and EUR/JPY are trending lower making USD/JPY upside very hard to come by. The market has gotten very quiet, very fast ahead of tomorrow's Non-Farm Payroll. The market's expectations seem to be for a strong reading, despite the ADP's huge 150k miss, as the dollar has been steadily bid all week.

Our 1.2985 target is now back in play. The daily EUR/USD chart shows a beautiful example of December price relationships with applied Fibonacci ratios that point to a single zone of confluence. The December move from 1.3367 down to 1.3051 totaled 316 points. If you project the current move down originating at 1.3296 on a 1-to-1 ratio compared to the previous move down originating at 1.3367, you arrive at 1.2980. Don't forget one is not only the loneliest number, but it's the first number in the Fib sequence.

Now, let's take a look at the 1.3051 to 1.3296 move up. If price were to return to 1.3051 lows, you can saw price has retraced 100%. The minute we move below 1.3051, we have gone from retracement territory to extension territory. The first two extensions we use are 127.2% and 161.8%. The second is fairly easy to recognize, it's the divine proportion (The Da Vinci Code), but the first is not as apparent. If you take the square roof of 1.618 you will find 1.272. Further, if you take the square root of the inverse of the divine ratio, .618, you will arrive at my favorite retracement level, .786.

So anyway, with the recent EUR/USD weakness heading into tomorrow's major data release, the reaction following the release will be very telling. Should the number come in weaker than expected and EUR/USD can only manage a feeble rally, we will know that there are greater forces at work in the market and we can begin to work towards our 1.2985 target.

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.