EURUSD:1.1980 Key support

Well an instructive day Friday. Headline payrolls and unemployment ratedisappointing but some argument surrounding supply issues and their impactlimiting the net impact on fixed income in the end. So if we argue the number isnot as bad as it seems, it still leaves us in a fertile growth environment where theFed won’t be pressured too early on the tapering issue, and further evidence of apassing of the growth leadership baton from the US to elsewhere, Europe inparticular. In the euro specifically we tested 1.2000 very strongly in the early partof last week and a lot of positions were reduced, and whilst we have had a decentbounce it feels like the market hasn’t had time to re-engage. I argued a week or soago that the euro could only rally so much on the re-rating of European growth andCOVID pessimism, particularly with the US looking so strong and a conversation tobe had by the Fed imminently, but we had the majority of Fed speakers last weeksinging from the same hymn sheet regarding policy patience, and no doubtFriday’s number will have strengthened this argument. I added short usds overallon Friday, mainly in European centric pairs, euro, usd/scandis and cablespecifically. Initial support should come in now just sub 1.2100 in the euro, thatwas the first liquidity post numbers and held on the mini dip, and the more obviousbigger support now 1.1980/1.2000 is needed to send us back to the ranges, whilstabove the Feb high of 1.2240 is the initial target and potentially up towards the Q1highs. Risks are a continued rebound in US fixed income if the market is willing todismiss Friday’s print, although relative yields are then worth watching as bundsbarely moved when treasuries initially rallied on Friday.