The dollar shrugged off a dismal labor report in early Friday trading - slipping initially following the release, but rallying sharply after traders digested the news. The greenback fell just shy of a fresh all-time low against the euro at 1.4954 before surging to 1.4788 while pushing the sterling beneath the 1.97-level to 1.9655.

The non-farm payrolls for January unexpectedly contracted by 17k, considerably worse than calls for an increase of 80k - and shrinking from an 18k increase in payrolls in the previous month. The unemployment rate, however, improved to 4.9%, drifting from 5.0% a month earlier. Average earnings edged up by 0.2%, but down from 0.4% previously, while the average work week was marginally lower at 33.7 hours. Also released today were January manufacturing ISM, which defied estimates for a decline to 47.3 from 47.7, instead improving to 50.7 and the University of Michigan consumer sentiment survey, improving to 78.4 from 75.5.

Euro Flirts with Record High

The single currency climbed within reach of a new all-time high against the dollar before falling sharply back toward the 1.48-level. Eurozone economic data included January manufacturing PMI, which improved to 52.8 from 52.6 while Germany's manufacturing PMI edged up to 54.4 from 53.6. Recall yesterday's inflation report from the Eurozone edged up to its highest level in 14-years, which will likely keep the ECB's language unchanged next week after its policy setting meeting. The Bank, maintaining its hawkish language since the last meeting, is seen leaving interest rates unchanged when it announces its results next Thursday at 4.0%.

With markets fully pricing in the Fed's easing cycle, we look for the euro to remain susceptible to selling pressure over the coming weeks as traders begin factoring the prospects for ECB rate cuts in the months to come.

EURUSD holds steady above the 1.48-level with support beginning at 1.4750, followed by 1.4720 and 1.47. Additional floors will emerge at 1.4660, backed by 1.4625 and 1.46. On the upside, ceilings are eyed at 1.4840, backed by 1.4875 and 1.49. Subsequent ceilings are eyed at 1.4930 and key resistance at 1.4960.