Risk remained the operative word in the NY session and the clearest trade has been to buy the yen crosses unabashedly. US equity marts followed European bourses higher and added about 0.75% in broad terms. EUR/JPY is once again becoming a great barometer of risk and the cross soared from lows just under 126 to rest near the 127.50 zone as US markets closed. USD/JPY remains much better bid as well, following the conclusion to Japanese year-end repatriation and the pair looks poised to close above the 93.77 January highs, after printing intraday highs just above the 94 area. We would anticipate some option-related resistance now ahead of 94.50 but would be remiss not to mention that there are not a whole lot of other barriers until the 95 zone. Keep in mind that the US Treasury auctions next week could elicit another squeeze higher in yields and the 2010 relationship between that and USD/JPY suggests the path of least resistance is still higher here.

Economic data in the US continued to flash improvement in the labor market. The initial jobless claims number dipped to 439K from 445K and what is more, the four-week moving average is now the lowest since September of 2008. Remember that the trend is your friend and in this case it remains in the right direction - lower. In other US data, the ISM manufacturing index blew away expectations with a 59.6 result for the month of March on the heels of a 56.5 read prior. This was the best print since July 2004 and confirms that the manufacturing renaissance in the United States is forging ahead unabated. The employment sub-component printed a nice 55.1 and the three-month trend in this metric is now the highest since December 2005, when we were adding nonfarm payrolls at about a 130K monthly clip.

Speaking of NFP, the number is widely expected to come in very strong (out tomorrow at 8:30am NY time) and the consensus is a robust 184K. We are a bit more optimistic and expect the payback for the February weather impact along with what will be the start of 2010 census hiring in earnest (government looking to add 1.2 million jobs on this front by May) to elicit a 230K jump in the headline. Anything north of 200K is likely to send the yen crosses higher still but keep in mind that bond markets will not be open all day and that equity marts have the day off for Good Friday. Trading is likely to be exceptionally thin (light volume) but the moves still have the potential to be diabolical.