Forex News and Events:
Clearly the scheduled highlight of the trading day will be the US payroll reports. This week’s ADP survey indicated that private sector payroll employment increased by 209k vs. 206k exp. in March. This number is consistent without the recent improvements in the labor market and suggests a NFP read above 200k (213 exp vs. 227 prior). On the other hand, the ISM non manufacturing index came in below forecasts at 56.0 vs. 57.3 exp. The slight downtick shouldn't be of real concern since the drop only revised abnormally large increases in the past few months. Still supporting a solid NFP read today as the underlying employment index, which rose to 56.7 from 55.7 Yesterday, after a unexpectedly strong Swiss CPI at 0.6% m/m and -1.0% y/y triggered a delays wave of heavy EURCHF selling. This small move is important since pulled from the SNB's own quarterly report on the inflation forecast, we are heading towards a bottom, then a gentle upwards slope. As deflation concerns begin to wane, there will be increasing pressure for an exit strategy from the EURCHF “floor”, along with other unconventional policy strategies. The size of the trade quickly sucked up all offers and the pair quickly traded to 1.2000. It is rumored that the SNB stepped in with roughly 2bn to counter the move. The SNB provide the standard rhetoric that they would support the 1.2000 “floor” with unlimited funds however, the damage has already been done. There will significant debate on possible exit strategies and SNB credibility.
Today's Key Issues (time in GMT):
2012-04-06T12:30:00 USD NFP prior 213 exp 227
2012-04-06T12:30:00 USD Private NFP prior 230 exp 233
2012-04-06T12:30:00 USD Unemployment prior 8.3% exp 8.3%
2012-04-06T12:30:00 USD Average weekly hrs prior 34.5 exp 34.5
2012-04-06T12:30:00 USD Consumer credit prior 12.0 exp 17.8
The Risk Today:
EURUSD EURUSD’s steady selling pressure this week has made short work of all near-term support including 1.3100, giving the general outlook a undoubtedly bearish tone. Despite the slight bullish correction in Asia, the bears are still in control and will likely test 1.3005 in the coming sessions. With the violation of 1.3100 psychological support puts the next level from here at 1.3005 (15th Mar low), then key trigger at 1.2976 (25th Jan low) will come into play. With a light data calendar today we could see further drift. Next resistance levels are seen at 1.3107 (4th April pivot), 1.3191 (support turned resistance), then not much supply till 1.3244 (21d MA), key level 1.3385 (27th Mar high) and 1.3487 (29th Feb high).
GBPUSD GBPUSD come under another wave of selling yesterday slumped to lows of 1.5806, pushing further below the uptrend channel that had been providing guidance. Once again, the bulls are now trying to push the price back up but demand remains thin ahead of NFPs and downside remains tempting as the next area of demand is not till 1.5771. On the downside, support is eyed at 1.5771 (22nd Mar low), 1.5754 (16th Mar breakout lvl), 1.5697 (13th Mar high), 1.5635 (15th Mar base support), 1.5603 (13th Mar low), 1.5516 (6th Jan high & 23rd Jan reaction low). If this rally can gather bids in the coming sessions watch for first resistance to kick in at 1.5919 (21st Mar high), 1.6001(27th Mar high) then our prior extension target at 1.6093.
USDJPY USDJPY symmetrical triangle on the hourly chart– a continuation pattern which suggests the bears have taken control, was triggered yesterday but the strength of the bears fell short of our 81.40 target. With today’s payrolls, a critical driver of US rates, good report could trigger a wave of buying, so we would be mindful of the upside today. However, with the pair trading safely within the 3-week bearish channel, we would look for selling pressure to pick-up after the holiday lull. Below us, support is located at 81.57 (2nd April low), 81.40 (1st Mar high & pattern target), 80.60 (7th Mar low), and 80.25 (4th Aug ‘11 reaction high). If the current bearish correction is not sustained, area above is notably clear of supply regions given the aggressive move last week. It’s worth noting next resistance at 82.99 (3rd April high), trigger resistance at 83.40 (27th Mar high), 84.18 (15th Mar high & extension target), 84.51 (15th Dec ‘10 high), then 85.50 (Fibo lvl from 101.00 to 75.60).
USDCHF USDCHF hit a another high of 0.9223 yesterday (breaking 0.9180 & 0.9118 resistance along the way), but the pair has not managed to hold onto all of those gains today, instead retracing marginally to 0.9197 levels. That said, optimism around today NFP should insure the positive momentum will continue into today’s session. Further gains are likely, but keep your eyes on EURCHF especially given yesterday test of 1.2000. Further rallies are likely to meet sellers back up through 0.9223 (5th April high), 0.9253 (16th mar high), then 0.9335 (15th Mar high) In the meantime, first support on the downside is located at 0.9180 (4th April high), 0.9143 (5th April pivot), 0.9095 (3rd April rally correction low), 0.9006/9 (27th Feb high), 0.8955 (11th Nov ‘11 pivot), then stubborn barrier support at 0.8931 (24th & 29th Feb low).