The NY session saw very good price action on all fronts as markets were whipped around initially by poor economic data out of the US but eventually recovered on news that housing problems are being dealt with (somewhat). Initial jobless claims came in much lower than expected at just 467K but the market smelled a rat as the numbers are still being distorted by seasonal adjustment difficulties around the holiday season. The focus was instead on the pop in continuing claims to 4.6M from 4.5M prior.

Later on, Obama's message that the US will basically spend its way out of this recession resonated poorly with stock markets and equities subsequently pushed into their intraday lows. The end of the day brought news that a major US investment house has worked out a plan with US Senators to modify mortgages in an attempt to stem the tide of foreclosures. This left stocks up a modest 0.3% in broad terms.

The US dollar was not so lucky however as talk of stimulus and deals means more money printing ahead. EUR/USD jumped about 100 points in the session and was sitting near 1.3710 ahead of the close. The 1.38 level contained the upside today but we reckon a much worse than expected NFP number tomorrow should see a test through here and into 1.3850 next.

GBP/USD ended the session about where it started near the 1.5240 area. The pair initially made a try into 1.5370 resistance but the upmove could not be sustained in the face of continued economic deterioration across the pond. That said, the focus remains higher near-term while above 1.51 support here.

USD/CAD weakened despite a lackluster day for oil prices, which were a touch lower at $42.40/bbl. Loonie shed more than -200 pips as yet another move above the critical 1.20 level failed. The pair was trading near critical support by 1.18 now and it looks like 1.1750 could be the next pit stop.

Upcoming Economic Data Releases (Asia Session) previous forecast

* 1/8 23:50 GMT JN Official Reserve Assets DEC $1002.9B - -

* 1/9 5:00 GMT JN Leading Index CI NOV P 85.2 81.5

* 1/9 5:00 GMT JN Coincident Index CI NOV P 97.7 94.9