The strong US dollar rally has started to fade after the December jobs report, with most major currencies showing signs of recovery. The focus remains on the Fed’s next move and potential policy shifts in other central banks.

Main Takeaways:

• US Dollar: Strength waned after strong jobs data, with yield premium narrowing and mixed labor market signals suggesting a potential Fed pivot.
• Euro: Mixed European data but EUR/USD edged higher, potentially bouncing off a key technical level.
• Australian Dollar: Recovering after a rough week, but retail sales data could be key.
• Canadian Dollar: Flat against USD despite weak job growth, wage pressures might keep BoC on hold.
• Japanese Yen: Slight gains, potential for further strength as USD weakness continues.

Details:

• EUR/USD: Up, testing resistance around 1.10 after bouncing off a Fibonacci level. German data weak but eurozone retail sales in line with expectations.
• AUD/USD: Down earlier, but recovered. Australian retail sales expected to rebound.
• USD/CAD: Up slightly, no major releases from either country. Canada’s weak job growth balanced by strong wage data.
• USD/JPY: Down slightly, Tokyo Core CPI expected to ease. Potential for further JPY strength with bearish reversal conditions on USD/JPY.

Technical levels:

• EUR/USD: Resistance at 1.10, support at 1.08.
• AUD/USD: Resistance at 0.6762 and 0.6809, support at 0.6702 and 0.6655.
• USD/CAD: Resistance at 1.3411 and 1.3460, support at 1.3349 and 1.3300.
• USD/JPY: Resistance at 144.80 and 145.80, support at 143.60 and 142.63.

Key Events:

• Tokyo Core CPI (Tuesday)