It was the best of times, it was the worst of times. Dollar bears liked their chops after getting all lathered up about reports that China’s sovereign wealth fund was buying gold and doing its utmost to avoid the dollar. Steady sales of EUR/USD by China belied that talk, however. Steady Asian selling above the 1.4300 level was seen this morning (we reached 1.4348 right out of the gate). They sold all the way down as well, with last reports in the 1.4290s. Prices slumped after the ECB announced it would not charge banks a premium for 1-year cash at its next repo operation. Dealers interpreted that action as a sign the ECB is still trying to nurse very troubled banks back to health. Rates are also likely to stay low for a long time ahead, traders concluded.

Very upbeat comments from widely respected Chinese economist Fan Gang were unable to revive risk appetites this mornign, adding further selling pressure to EUR/USD and EUR/JPY.

EUR/JPY stalled exactly at its 50% retracement of the 134.15/131.00 decline at 132.55 before dipping.

What does today’s action mean for tomorrow’s employment report? Probably not a lot. Dealers continue to buy strength and sell weakness in a market that is essentially stuck in a rut. A good number will have traders jumping on a moving train at higher levels while 1.4450 and 1.4500 barriers continue to corral price action.

Given the huge gold move this week, we’d suspect most are long a bit of EUR/USD or AUD/USD “just in case” the USD plays catch-up. That makes the downside for those pairs the most vulnerable tomorrow, in my view.

New York ranges:

EUR/USD: 1.4237/1.4348

USD/JPY: 92.34/79

GBP/USD: 1.6305/1.6396

AUD/USD: 0.8367/0.8417