In case of  a slightly better-than-expected NFP report, which could lead the U.S. dollar to strengthen against its major counterparts, and FED may reassess its outlook for the economy as the prospects for future growth improve. Risk appetite increasing on the back of it can push commodity prices are higher.

In AUD leg, market pricing less chance of  future rate hikes by RBA due to  double-dip concerns and positioning accordingly on the spot side may catch the market on the wrong foot.

76.90-77.00 level trades  as a major resistance with the help of 55 days SMAVG at 76.96.  A clean break of this level post- NFP due to boosted risk sentiment may bring a knee-jerk jump up to 78.20 and 79.35 accordingly while in bigger picture the price target is 80.45 ( 200 days SMAVG ) after a broken 55 days SMAVG.

Having said that, a rejection of the topside will put pressure on the pair as expected and trend support will be traded at 73.85 with a falling knife price action.

Looking for one more rally, before turning bearish Euro…

After leaving the key interest rate at 1%,  ECB raised its  GDP growth forecast to 1.6% from 0.9% for 2010. ECB President Trichet said a double-dip recession is not in the cards  and risks to the inflation outlook are on the upside during his press conference after the policy meeting yesterday.

Trichet delivering an optimistic assessment of Eurozone economies will be extra ammo against any squeezes for EURUSD bulls before NFP payroll numbers today.

Good sovereign interest for Euros between 1.2735-1.2775 area keeps the pair well bid last 48 hours and market players are keen to buys the dips to take the advantage of deflation fears in US bringing another wave of QE  and causing greenback suffering ultimately.

Daily oscillators points the rising momentum for a possible rally and a break of 1.2855 level opens the window of opportunity to test 1.3090 resistance after a knee jerk print of 1.2990.

On the other hand, a failure of topside break suggests a quick squeeze down to 1.2720.

The bullish reversal on risk sentiment in Asian session due to Aussie and Chinese data continued to dominate the rest of the day after better than expected US Manufacturing data.

Good sovereign demand appearing below 1.2725 in early London session helped market to trigger stops above 1.2750 and Euro being bought for EURCHF and EURJPY as a wash currency on a risk on theme accelerated the pace of the rally up to 1.2856.

I reckon market players ignoring the first negative print of ADP in 2010 may end up taking profit in long risk positions or use these levels to re-enter short risk positions before tomorrow’s NFP.

1.2785-1.2865 range is possible to dominate the Asian session before we see any clear sign on USD theme.

Good Luck All.

S&P nearing sell levels, decent correction.

Euro and DXY similar story, look for a dip in the dollar to get long.