At first glance across currency activity on Friday one would have thought it was a decidedly risk-on session translating to the usual greenback weakness / higher yielding currency strength. However, in one of the most important days of the economic calendar, the release of US non-farm payrolls provided yet another less than convincing glimpse into the health of the US labor market.  Non-farm payrolls show US economy created 39,000 jobs in the month of November falling well short of the 150,000 new jobs estimated.  Private payrolls also failed to meet the estimates of 160,000, recording a meager 50,000 new jobs. After an initial burst of volatility, the ensuing hours of the US session saw the US dollar continue a downward trajectory against major counterparts. The US dollar index which measures the value of the US dollar against six major currencies fell 1.115 per cent to finish the week at 79.377 representing a weekly decline of 1.2 per cent. In contrast to current fundamental directives for the US dollar, the usual flight to the perceived safety of hard cash was nowhere to be seen as investors found comfort in the latest employment data may delay any plans the US Government may have to begin fiscal tightening. A small concession to the weak job numbers was a better than expected reading of factory orders which fell 0.9 per cent in October against estimates of a 1.3 per cent contraction.

AUD/USD

After a fall from grace over the last two weeks, the Aussie dollar is once eyeing the grail of US dollar parity with the local unit climbing near 1.5 US cents over the course of European/US trade. Considering the hurdles thrown both from a local and international perspective, it was a stand-out week for the local unit, finishing the week at 99.3 US cents after earlier in the week slumping to lows of 95.36 US cents - these lows coincided with key support of 95.4 US cents as suggested by GO Markets in last Mondays report. The week ahead will likely see the local unit stay true to its correlation with global sentiment in which we can look to the S&P 500 as a key barometer - however, the week ahead also brings more in the way of local risk events which could to a degree offset or exacerbate any trend the US may define. Tuesday will see the RBA reconvene for the final time in 2010 in what is expected to see local interest rates remain steady at 4.75 percent, however the key directive will no doubt be in the finer points of the post decision statement. Recently the local unit took a south-bound turn as RBA Governor Glenn Stevens provided a rather a neutral tone on the interest rate outlook in a testimony to a parliamentary committee. Governor Stevens defended the central bank's decision to pre-empt to curve in November's rate hike, and now believes current interest rates to be an appropriate setting of policy for the period ahead which may not see further tightening come until the middle of next year and maybe a little bit more after that. So in essence, the market is more than prepared for more of the same neutral tone from the RBA, however since this time the local economy has produced lackluster readings on GDP and retail sales amongst other things which may find the RBA a tad more dovish than that of previous meetings. That said, the local unit carries a distinct advantage given the significant yield differential against major counterparts - therefore will remain prime beneficiary if sentiment remains buoyant.

EUR/USD

All things considered, Euro price activity has been able to remain reasonably composed in the last week. After a brief relief rally earlier in the week on Ireland's bailout approval, the focus continued to be on potential contagion to other European peripheral nations, with Portugal and Spain first in the firing line. There's little doubt, the markets all too willing to pull the sell trigger at the first sign of trouble, however, judging by recent Euro price activity with each bout of illness the subsequent recovery duration becomes shorter. Nevertheless, the Euro remains in a vulnerable position especially against its healthier counterparts. The week ahead brings little in the way of top tier data so we can expect the health of European peripheral nations to be the focal point and key driver of Euro price action. Any talk of further aid contributions from the US to the IMF may also act as a supporting factor for the Euro. Whatever the week ahead may have in store, there's no doubt the health of the PIIGS will remain in the spotlight - however the direction of the Euro will likely to be governed on how any Euro-negative talk translates to US markets with the S&P 500 the key barometer.

AUD/EUR

It's a battle of the relative fundamentals and you don't have to look too deep to find a conclusion. Throughout the latest bout of ill health from Europe the common theme of Aussie dollar strength against the Euro remains firmly intact. The Aussie dollar rose to new all-time highs of 74.1 Euro cents on Friday and remains on a firm footing to continue its record breaking run as Europe struggles to regain economic composure. Although It's clear the best grounds for further upward moment from the Aussie comes against major counterparts is when the sun is shining, the local unit has displayed a tendency to continue a slow upward trajectory against the Euro is most economic settings. Even when the Euro was returning from the doldrums against the greenback of USD 1.19 in June this year to recent highs of USD 1.40, the Aussie dollar continued a slow appreciation against the Euro. Barring any major economic surprise to the downside from a local perspective - or China for that matter, the bias remains to the upside.