Today’s U.S. Non-Farm Payrolls Report appears to be taking a backseat to the fear that sovereign debt woes in the Euro Region will escalate. Traders continue to monitor the financial difficulties in Greece while keeping one eye on the key U.S. jobs report. This morning’s report is expected to show that 25,000 jobs were added last month. This is down from a guess of 40,000 earlier in the week.

Key retracement levels were violated in the March E-mini S&P 500 yesterday. Look for continued weakness with 1069.50 the nearest resistance. The charts indicate there is room to the downside with 1021.00 a potential near-term target. Today’s jobs data will have to blow away estimates or a solution to the fiscal problems in Greece will have to be reached in order to trigger a rally.
March Treasury Bonds continued higher overnight. Key support at 118’24 is holding which could trigger a rally to 119’24. A higher than expected jobs report will trigger a break in this market provided traders decide to focus on the economic outlook rather than risk.

The stronger Dollar pressured April Gold overnight. Last night this market tested a key 50% level at $1052.30. Oversold conditions and position squaring ahead of today’s jobs data stopped the decline at $1049.60. The direction of this market will be dictated by the movement in gold.

The Dollar and demand for higher risk assets will also influence the direction of March Crude Oil today. The supply and demand situation remains bleak so this market has become sensitive to currency movement. Look for an acceleration to the downside should the pair of main bottoms at 72.53 and 72.43 fail to hold as support.

The U.S. Dollar is trading higher against a basket of currencies including the Japanese Yen which posted a strong gain versus the Greenback on Thursday. The Forex markets are once again caving into risk aversion as traders take positions in the safety of the U.S. Dollar.

Additional support is being provided by traders who are buying the Dollar because of an upbeat U.S. economic outlook. These traders believe the Dollar will rally if the U.S. Non-Farm Payrolls Report shows an increase in jobs. Overall, however, traders are approaching the jobs data report with caution because of yesterday’s reported surprise rise in weekly initial claims.

Investors are looking for the U.S. Non-Farm Payrolls Report to show zero change to 25,000 higher. This will be much better than last month’s report which showed a surprise loss of 84,000 jobs. Earlier in the week, economists were forecasting an increase of 40,000 jobs, but a lower ADP Employment Report figure earlier in the week and yesterday’s surprise rise in Weekly Jobless Claims forced analysts to lower pre-report estimates.

Following the release of the U.S. jobs report, the employment news is likely to take a backseat as traders will refocus on the economic woes coming out of the Euro Zone. With no change in the situation imminent, the theme of the day is likely to remain risk aversion. Continue to look for investors to sell high risk commodities and stocks while seeking protection in the lower yielding Dollar and Japanese Yen.

The March Euro continued to feel downside pressure overnight. Traders still believe that Greece lacks the means to deal with its deficit issues on its own and are waiting for either the European Union, European Central Bank or the International Monetary Fund to come to the rescue. Fears are also being raised that the fiscal problems in Greece are not isolated and may spread throughout the Euro Region should it default on its debt.

Downside pressure continued on the March British Pound overnight. Yesterday, the Bank of England as expected announced that interest rates would remain at a historically low level. In addition, it voted to take a pause in its quantitative easing program, but left open the possibility it would increase its asset buyback program should conditions warrant such a move. Investors are now becoming concerned that the deficit problems in the U.K. may escalate like they are in Greece.  Oversold short-term conditions may trigger a short-covering rally.

On Thursday, the March Japanese Yen finished sharply higher as investors sought safety in lower yielding assets over concerns about the possibility of sovereign debt default in Greece. Short-term oversold conditions are helping the Dollar to rebound slightly this morning. Traders expect the Japanese Yen to rally further should the situation in the Euro Region continue to escalate. At this time, the Japanese government does not have any plans to weaken its currency.

Weaker gold, crude oil and equities are contributing to the weakness in the March Canadian Dollar. Traders are pressuring these higher yielding assets as they seek shelter in the lower risk U.S. Dollar. Strong downside momentum drove the March Canadian Dollar through the last main bottom at .9326. The weekly chart indicates that .9212 is the next downside target.

The March Swiss Franc is trading lower overnight, but losses have been limited by an intervention by the Swiss National Bank. The SNB acted aggressively in response to the Swiss Franc’s rapid appreciation against the weakening Euro. According to SNB President Hildebrand, the central bank will continue to “resolutely prevent” any “excessive appreciation” by the Swiss Franc to fight deflation. Hildebrand was speaking to the Wall Street Journal at the time of his comment.  The weekly chart indicates that .9152 is the next possible downside target.  

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