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Traders continued to sell U.S. dollars over the past 12 hours as they begin to lay on positions ahead of Friday's non-farm payrolls report. Expectations for November's report are high with some people on the street even whispering about a positive number. We highly doubt that the U.S. managed to return to job growth last month but we do believe that job losses moderated significantly.  This morning, Challenger Grey & Christmas reported a 72.3 percent drop in layoffs while ADP reported a 169k decline in private sector payrolls compared to the 195k in October.  Along with the sharp improvement in jobless claims last month, there is a good chance that non-farm payrolls dropped by less than 125k and possibly even 100k.  However to be more certain, we will have to wait for Thursday's service sector ISM report.

In the meantime, it is important to recognize that the sell-off in the U.S. dollar is beginning to find some near term support.  For example, the Australian and New Zealand dollars have barely managed to extend their gains while the euro, Japanese Yen and Canadian dollars are weaker against the greenback.  This suggests that in order for the EUR/USD and other currency pairs to make a fresh push higher, we will need a catalyst.  This could come in the form of the Beige Book report which is due for release at 2pm ET.  However if the Beige Book report fails to move markets, which is feasible since nothing new is expected from the Fed, the focus will turn to the non-manufacturing ISM report. Yesterday we learned that the manufacturing sector expanded at a slower pace and if the service sector does so as well, the U.S. dollar could suffer.

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.