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Daily Report: Markets in Tight Range, Awaiting Non-Farm Payroll
Markets are generally staying in tight range as traders cautiously await the highly anticipated non-farm payroll report from US. NFP is expected to show -105 k contractions in August but that's mainly due to dismissal of temporary workers hired by government. The private payroll is indeed expected to show around 40k expansion, still in mild recovery despite slowing from July's 71k. Unemployment is expected to climb from 9.5% to 9.6%. The leading indicators to NFP were quite mixed. On the one hand, the employment component of ISM manufacturing was impressively strong and breached 60 levels to 60.4 for the first time since 2004. Consumer confidence also posted some improvements. However, ADP employment report disappointed markets and showed -10 k contractions while jobless claims remained stubbornly high.
In any case, markets will all focus on the headline number of NFP, the private job number as well as the unemployment rate. It's advised to be clear about the overall combined impact on the markets before jumping in. So far, we'd maintain our view that 10480 resistances in DOW are needed to be violated to confirm markets are back in risk-seeking mode. 1.2921 In EUR/USD and 81.92 in dollar index are needed to be taken out decisively to confirm underlying weakness in the greenback. Also, we'd prefer to see yen crosses taking out recent low before confirming resumption in yen strength.
Elsewhere, Swiss CPI was flat mom, rose 0.3% yoy in August. Euro zone PMI services are expected to be unrevised at 55.6 in August. Retail sales are expected to raise 0.2% mom, 0.6% yoy in July. UK PMI services are expected to drop to 52.9 in August.
While Sterling is the worst performer this week, Canadian dollar isn't much better. CAD/JPY continues to draw support from 78.52 levels and is staying in consolidations. But short term outlook remains bearish with 83.48 resistance holds and we'd expect the fall from 94.46 to resume sooner or later. Also, note that decisive break of 78.52 support will also confirm completion of medium term rebound from 2009 low of 68.38 and will pave the way to retest this low.
EUR/CHF Daily Outlook
Daily Pivots: (S1) 1.2937; (P) 1.2989; (R1) 1.3036
EUR/CHF's consolidation from 1.2850 is still in progress and further recovery could be seen. But after all, upside is expected to be limited by 1.3143 resistances and bring fall resumption. Breka of 1.2850 will target 100% projection of 1.4587 to 1.3072 from 1.3923 at 1.2408 next. Though, break of 1.3143 will indicate that a short term bottom is at least formed and bring stronger rebound towards 1.3270/3455 resistance zone instead.
In the bigger picture, fall from 1.3923 should be resuming long term down trend from 2007 high of 1.6872. 100% projection of 1.8234 to 1.4391 from 1.6827 at 1.2984 next, which is close to 1.3 psychological levels, is already met. Sustained trading below 1.3 will pave the way to next medium term target of 161.8% projection of 1.6368 to 1.4315 from 1.5138 at 1.1816. On the upside, break of 1.3923 resistances is needed to be the first signal of medium term reversal. Otherwise, outlook will remain bearish.
AUD/USD Daily Outlook
Daily Pivots: (S1) 0.8972; (P) 0.9044; (R1) 0.9186
With 4 hours MACD crossed below signal line, a temporary top is in place and bias is turned neutral. Nevertheless, another rise is still expected as long as 0.8860 minor supports holds. Above 0.9119 will target 0.9220. Break there will confirm that whole rise from 0.8066 has resumed for 61.8% projection of 0.8315 to 0.9220 from 0.8770 at 0.9329 next. However, break of 0.8860 will revive the case that AUD/USD has topped out at 0.9220 already and will turn focus to 0.8770 supports for confirmation.
In the bigger picture, price actions from 0.9404 are consolidations/correction to medium term up trend from 0.6008. Rebound from 0.8066 is treated as the second leg inside such consolidation. Hence even in case of another rise, we'd expect strong resistance near to 0.9404 to limit upside and bring another fall to continue the consolidation. On the downside, break of 0.8315 supports will suggest that whole correction is going to extend deeper to beyond 0.8066 supports, possibly to 0.7702 key support before completion.
USD/CAD Daily Outlook
Daily Pivots: (S1) 1.0477; (P) 1.0516; (R1) 1.0561.
USD/CAD's consolidation from 1.0666 might still continue and deeper retreat cannot be ruled out. But still, we'd expect downside to be contained well above 1.0246 supports and bring another rise. Note that decisive break of 1.0675 resistance will further affirm our bullish view that medium term rebound is resuming and should target another high above 1.0851.
In the bigger picture, USD/CAD broke out of recent converging range, which suggests that rise from 0.9929 is possibly resuming. Break of 1.0675 will further affirm this bullish case and target 1.0851 and above. Also, note that this will also affirm the case that whole medium term fall from 1.3063 is completed and will target 38.2% retracement of 1.3063 to 0.9929 at 1.1126 at least, with prospect of extending further to 61.8% retracement of 1.1866. We'll favor this bullish case as long as 1.0246 supports holds.
EUR/USD Daily Outlook
Daily Pivots: (S1) 1.2696; (P) 1.2775 (R1) 1.2888
EUR/USD's recovery could still extend further but after all, upside is expected to be limited by 1.2910 resistance and bring resumption of the fall from 1.3330. Below 1.2587 will target 61.8% retracement of 1.1875 to 1.3330 at 1.2431 next. Sustained trading below there will argue that medium term decline is likely resuming for another low below 1.1875. However, decisive break of 1.2921 will indicate that fall from 1.3330 is completed and will bring stronger rebound to retest 1.3330 high instead.
In the bigger picture, note that EUR/USD is still limited below 55 weeks EMA (now at 1.3363) and thus, there is no indication of medium term bottoming. Whole decline from 1.6039 is possibly still in progress. Such decline is treated as correction to long term up trend and will target 1.1639 supports after taking out 1.1875 low. On the upside, though, above 1.3330 will turn focus back to 55 weeks EMA and sustained trading above there will pave the wave to further rise to upper trend line resistance (1.6039, 1.5143, now at 1.4699).
GBP/USD Daily Outlook
Daily Pivots: (S1) 1.5345; (P) 1.5404; (R1) 1.5457
Intraday bias in GBP/USD remains neutral for the moment as it's staying in consolidation in tight range above 1.5326. More consolidations could still be seen but after all, fall from 1.5997 is expected to continue with 1.5596 minor resistances intact. Below 1.5326 will target 1.5123 clusters support (50% retracement of 1.4230 to 1.5997 at 1.5114). Decisive break there will confirm our bearish view that rises from 1.4230 has finished at 1.5997 already and will target a retest on this low. On the upside, however, a break above 1.5596 resistance will argue that fall from 1.5997 might be over and will flip bias back to the upside for stronger rebound.
In the bigger picture, price actions from 1.3503 are viewed as consolidation to fall from 2.1161 only with rise from 1.4230 as the third leg. In any case, a break of 1.4230 supports will indicate that the consolidation is completed and down trend from 2.1161 is resuming for another low below 1.3503. In case of another rise, we'd expect strong resistance between 1.7043 and 50% retracement of 2.1161 to 1.3503 at 1.7332 and finally bring long term down trend resumption.
USD/CHF Daily Outlook
Daily Pivots: (S1) 1.0086; (P) 1.0135; (R1) 1.0175
USD/CHF is still bounded in consolidation in tight range above 1.0064 and intraday bias remains neutral. While stronger recovery cannot be ruled out, short term outlook remains bearish with 1.0330 supports turned resistance intact and recent decline is still expected to continue. Below 1.0064 will target parity next. Note that we'd anticipate strong support at around parity to contain downside, at least initially. However, sustained trading below parity will pave the way to 0.9916 key support level.
In the bigger picture, USD/CHF is possibly in the process of forming a medium term sideway pattern that started at the long term bottom of 0.9634 (2008 low). The pair will continue to stay in converging range of 0.9634/1.2296 for a while. A break of either 0.9916 support or 1.1729 resistance is needed to indicate that USD/CHF is back into a directional trend. Otherwise, medium term outlook will remain neutral.
USD/JPY Daily Outlook
Daily Pivots: (S1) 83.99; (P) 84.27; (R1) 84.55
USD/JPY is staying in tight range above 83.66 and intraday bias is turned neutral for the moment. As noted before, recovery from 83.66 might be consolidating fall from 85.89 or part of the consolidation from 83.61. But even in case of strong rebound to above 85.89, we'd still expect upside to be limited well below 88.25 support turned resistance and bring another fall. On the downside, decisive break of 83.61 will confirm resumption of recent down trend and should target 80 psychological level next.
In the bigger picture, whole down trend from 2007 high of 124.13 is still in progress and there is no sign of reversal yet. Such down trend could still extend further towards 79.75 (1995 low). Though, we'll be cautiously looking for some sign of loss of momentum in case of further decline. On the upside, however, note that break of 94.97 resistance is needed to be the first sign of medium term reversal. Otherwise, outlook will remain bearish.
EUR/JPY Daily Outlook
Daily Pivots: (S1) 106.94; (P) 107.77; (R1) 108.97
Intraday bias in EUR/JPY remains neutral for the moment as consolidation from 105.42 is still in progress. Stronger rise might be seen and a breach of 109.54 cannot be ruled out. But after all, upside is expected to be limited by 111.09 cluster resistance and bring fall resumption eventually. Break of 106.17 will flip bias to the downside for 105.42. Break there will confirm that whole fall from 114.72 has resumed and should target medium term projection level at 103.45 next.
In the bigger picture, whole fall from 139.21 is viewed as resumption of long term down trend from 2007 high of 169.96 and is still in progress. Next target will be 61.8% projection of 169.96 to 112.10 from 139.21 at 103.45 which is close to 100 psychological levels. Though, we'd expect strong support between 2000 low of 88.96 and 100 psychological levels to contain downside and bring reversal. On the upside, break of 114.72 resistances is needed to be the first alert of reversal. Otherwise, outlook will remain bearish.
GBP/JPY Daily Outlook
Daily Pivots: (S1) 129.08; (P) 129.83; (R1) 130.52
Intraday bias in GBP/JPY remains neutral as sideway trading form 128.63 continues. More consolidations could still be seen but we'd expect upside to be limited below 133.57 resistances and another fall. Below 128.63 will indicate that whole decline from 137.75 has resumed and should target a test on 126.73 low next. After all, we'd hold on to the bearish view that rebound from 126.73 is finished at 137.75 as long as 133.57 resistance holds.
In the bigger picture, GBP/JPY is still trending well below the medium term falling trend line from 163.05 (now at 137.08) and thus fall from there is still in progress for a test on 118.18 low. Break there will confirm that whole down trend from 2007 high of 251.09 has resumed for 61.8% projection of 215.87 to 118.81 from 163.05 at 103.06 next, which is close to 100 psychological level. However, note that sustained trading above the trend line (now at 137.08) will argue that fall from 163.05 is finished and turn focus to 145.94 for confirmation. Also, this will suggest that such fall is merely the second wave of the whole consolidation pattern from 118.81 and will bring another rise to 163.05 and above before resuming the longer term down trend.
EUR/GBP Daily Outlook
Daily Pivots: (S1) 0.8288; (P) 0.8317; (R1) 0.8356
With 4 hours MACD crossed below signal line, an intraday top should be in place at 0.8346 and bias is turned neutral. Some consolidations could be seen below 0.8346 first. But downside is expected to be contained by 0.8247 supports and bring another rise. As discussed before, the fall for 0.8530 is possibly finished at 0.8141 already. Above 0.8346 will bring another rise to retest 0.8530 high. However, break of 0.8247 will argue that rebound from 0.8141 is finished and turn focus back to this support.
In the bigger picture, whole decline from 2008 high 0.9799 is viewed as a three wave correction from to the larger up trend. There is no confirmation that such correction is finished yet. However, as such correction is expected to conclude inside 0.7693/8186 support zone and hence, focus will be on reversal signal in case of another fall. On the upside, break of 0.8530 resistance will suggest that EUR/GBP has possibly bottomed already and will turn outlook bullish for 0.9410 resistance for confirmation.
Disclaimer: Content of this article is for informational purposes only; they are based upon information gathered from various sources believed to be reliable, complete, and accurate. However, no guarantee can be made as to the validity of the believed sources. All statements and expressions in are opinions, and not meant as investment advice or solicitation. Forex Markets can be volatile and opinions may change without notice.
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