With the festive season behind us, it was back to business on the forex market on Monday. With very low volatility characterizing markets over the past couple of weeks, we witnessed some interesting breakouts to reach new highs and lows. As market participants returned on the second half of the week we saw some interesting moves shaping up.

The euro swung aggressively to record a fresh year’s high at the end of 2013 against the dollar but plunged to a one-month low on Monday. The EUR/USD pair then bounced off 1.3571 to reach a high of 1.3656 on Tuesday. Forex investors looked reluctant to push the pair aggressively in either direction at the start of the week, ahead of a key jobs report from the United States on Friday and the European Central Bank monetary policy meeting on Thursday.

Friday’s US non-farm payroll number gained even more significance after a lackluster ISM business activity reading on Monday suggested that the world’s largest economy may be stuttering and growth may be uneven. Nevertheless traders and analysts will be eagerly waiting for Friday’s jobs print to gather clues on future policy by the Federal Reserve. A strong NFP number together with a lower jobless rate may give scope for the Federal Reserve to continue or even increase its tapering of monetary stimulus.

The greenback should continue to garner support as long as economic conditions continue to favor the Fed’s tapering outlook. In fact, less than optimistic ISM non-manufacturing data on Monday put the buck under pressure. However given the growing policy divergence between the Fed and other major central banks, the dollar is more likely to gain support from here, economic data permitting.

Yen stays under pressure on continued easing outlook

The yen was severely under pressure towards the end of the year and at the start of this year. USD/JPY rose to 105.44 at the first trading day of the year, while EUR/JPY touch 145.69 on December 27th. The Japanese currency fell to more than a five year low against the dollar and euro. The Nipponese currency continued to be weighed by a policy outlook aimed at further easing in 2014 to ensure the 2 percent inflation target is reached.

At the start of this week, the yen bounced back as traders took some of their profits, relieving some pressure off the currency. On Tuesday however, it was again on the back foot after a gauge of monetary stimulus increased. The yen was under pressure despite the drop in Asian shares, which fell near a four-month low, as falling stock prices in the Asian region usually signals traders to buy in the yen as a safety trade.

On a positive note for the Japanese economy, data showed prices of consumer durables like computers and smart phones rose for the first time since 1992, indicating that the Bank of Japan’s efforts to end deflation are beginning to bare fruits. Nonetheless, the outlook for the Nipponese currency remains bearish as long as the BOJ continue with its aggressive easing program.

Swissie weighed by risk-on bets

The Swiss franc was also under pressure at the start of this week, as a rally in European equities and higher-yielding government bonds dampened demand for the Swissie. EUR/CHF rose to 1.2373 by the time of writing on Tuesday, the highest since hitting 1.2375 on October 15th 2013. Italian and Spanish government bonds rose amid signs the euro area economy was recovering while Irish bonds soared, with yields falling to the lowest since 2006 as the nation prepared to make its return on the debt markets.

The Swissie may continue to encounter more significant pressure as underlying conditions in the largest global economies improve. An optimistic tone by European Central Bank President Draghi on Thursday may spark more gains in the EUR/CHF pair. On the other hand, USD/CHF bounced off a multi-year low, hit at the end of last year by 0.8800, and a strong jobs report from the US on Friday may push the pair into higher territory above 0.9000.

Gold starts on strong note

Gold started the year on a positive note, after testing the year’s low at the end of 2013. So far in 2014, the precious metal has risen to $1’248.50 per ounce, as gold traders took the opportunity to buy at a relatively lower price and caught short traders off guard. The outlook for gold is also significantly tied to the Fed’s policy outlook. Again, a strong jobs read from the US may add more selling pressure on the shiny metal and send it to test its lows at $1’180.70 once again.