Markets Consolidate post-NFP

Forex News and Events:

The USD-bulls dominate the currency markets post US nonfarm payrolls released on Friday. With revived specs on Fed tapering the QE, the refreshed demand in USD is the key theme. The diverging central bank expectations between Fed and ECB/BoE weigh hard on EUR and GBP, while USDJPY finally consolidates above 100.80, with positive outlook.

Else, Switzerland announced brilliant data in the morning. The unemployment rate retreated form 3.2% to 2.9% in June, while the industrial production expanded 3.0% in the first quarter. Happy, the swissy looks to ease more against euro and dollar

USD-Bulls in Charge

Released on Friday, the US nonfarm payrolls beat the market expectations. The US economy added 195’000 nonfarm jobs in June (vs. 165K exp. & 175K in May), while the private payrolls increased by 202’000. The unemployment rate remained stable at 7.6%, yet the mean and the median duration of unemployment came down in June.

The jobs data fired up the speculations on Fed tapering the asset purchases sooner rather than later.
According to Bloomberg survey, the majority of the market watchers expect the Fed to reduce the QE to USD 65bn worth purchases by September 2013. That said, the main theme in the fx markets is likely to remain the USD-strength and the hiking US bond yields. Early in the session, the US 10-year treasury yield hit 2.7535% in Tokyo, the highest level since July 2011.

Now, we are entering in a period where the rallies against USD will be seen as opportunities to sell, especially in EUR and GBP with dovish ECB and BoE policy outlooks explicitly declared in July.

EUR & GBP

The sell pressure on EURUSD and GBPUSD amplifies as the divergence in central bank policies broadens. To recap, last week ECB and BoE meetings resulted in dovish accompanying comments, while the hawk expectations on Fed revived with supportive nonfarm payrolls in US. Euro and Sterling plunged, with 2013-low levels as next stop.

EURUSD hit 1.2806 (the lower deviation band) and remained capped by decent offers at 1.2800. The pair consolidates losses this morning; however the bias remains decidedly bearish. The stops are building below 1.2795 meaning that the euro-bears should amplify if 1.2800 is broken. On the other hand, we should see some position adjustments from Asian central banks, expected to rebalance their currency allocations for stronger hedge against the USD-strength. As the markets start talking about further weakness before the upcoming German elections, we keep our bearish view in EUR with key resistance at 1.2995/1.3000 on the topside (daily cloud top/psychological resistance). Euro is likely to remain subject to event risk in the coming period.

On a similar pattern, GBPUSD plunged to 1.4858 post-NFP. The next stop is 1.4828 – year low. Currently, the pair trades below the lower deviation band (1.4897), while the RSI stands at 29% the oversold area. Expect some minor correction in cable, yet 1.5000/1.5049 (psychological resistance & Fibonacci 76.4% level on March – June rally) should cap the topside in the near term.

Golden Bear

The bear market in gold fortifies alongside with the dollar strength and hiking real returns in US bonds market. As the weakness in price started hitting the real sector, the gold miners are becoming put buyers to hedge for further price decrease. At the current levels, some big players on field (with mining costs between $1,100 - $ 1,200) already started to decrease supply. Today, any positive attempt is seen as selling opportunity; a sustainable mid-term trend reversal seems unlikely.

Today's Key Issues (time in GMT):

2013-07-08T12:30:00 CAD May Building Permits m/m, exp. -5.0%, last 10.5%
2013-07-08T19:00:00 USD May Consumer Credit, exp. USD 12.500B, last USD 11,058B

The Risk Today:

EURUSD hit 1.2806 (lower deviation band) post NFP, as the specs on Fed tapering the QE refreshed the demand in USD. Decent bids supports the pair above 1.2800, however stops are building below 1.2795. With trend and momentum indicators strongly bearish, we keep our downside view in EURUSD and look to sell the rallies below 1.2995/1.3000, with next target at 1.2750.The first level of resistance is located at 1.2877 (Fibonacci 50% retracement on Jul 12’ – Feb 13’ rally), 1.2995 (daily cloud top), 1.3074 (fibonacci 61.8% on Jul 12’ – Feb 13’ rally),1.3176 (10th June low), 1.3273 (Dec 12’ resistance turned support), 1,3300 (Jan 2nd high & psychological resistance), 1.3455 (14th Feb high), 1.3578 (7th Feb high), 1.3690/1.3715 (27th Sept high), then 1.3868 (9th Dec high). The next support is located at 1.2820 (20th May low) 1.2797 (17th May low), 1.2750 (11th Sep low), 1.2662 (13th Nov low), 1.2431 (22nd Aug low).

GBPUSD hit 1.4858 post-NFP and consolidated losses in Asia. Currently the RSI stands at 29% (oversold area), while the pair hovers around its lower deviation band. Despite the oversold conditions, we remain bearish on GPBUSD and look to sell the rallies targeting 1.4832 year-low. Expect minor correction throughout the day; the upside should remain capped at 1.5000/1.5049 (psychological resistance & Fibonacci 76.4% level on March – June rally). The support levels from here are1.4858 (July 5th reaction low), 1.4828 (12th March low), 1.4800 (psychological level).Watch for next resistance to come into play at 1.5009 ( 29th May low),1.5072/3 (4th July close & Fibonacci 23.6% on July 08’ – Jan 09’ drop), 1.5198 (Fibonacci 38.2% on Jan 13’ – Mar’13 drop), 1.5279 (old support turned resistance), 1.5287 (100-dayMA), 1.5465 (24th June high), 1.5600 (May resistance), 1.5644 (200day MA), 1.5807 (11th Feb high), 1.5891 (21st Jan high), 1.6007 (18th Jan high).

USDJPY extended gains on broad-based USD-strength. The pair hit 101.53 for the first time since May 30th. Bids are building at about 100.84 (Ichimoku cloud top); next minor resistances are 101.50/102.00 option strike levels. As the bullish conditions are expected to persist, we keep our positive view in USDJPY and look for dip-buying opportunities at 101.00, 100.80 than 100.50 levels. On the upside, we place our first resistances 102.53 (29th May high),103.55 (16th Sep 08 & 30th Sep 08 low), then 105.00 (psychological resistance). On the downside, supports are eyed at 100.84 (Ichimoku cloud top), 99.28/38 (July 3rd low & 50-dayMA), 98.15 (Ichimoku cloud base), 97.57 (100-dayMA), 93.57 (Fibonacci 61.8% on Sept 12’ – May 13’ rally), 92.56 (2nd Mar low & Fibo 38.2% retracement), 90.93 (25th Feb low), 89.35 (11th Jan high), 88.10 (23rd Jan low), 87.60 (16th Jan low), then 86.64 (27th Dec high).

USDCHF pulled out the 0.9626 resistance and hit 0.9667 with the strengthening USD. With trend and momentum indicators strongly positive, we remain bullish on USDCHF and continue looking for dip-buying opportunities. Bids are building above 0.9568, while the break of 0.9672 fibonacci resistance should speed up the rally to 0.9800/40 levels. The first levels of support remains at 0.9626 (31st May low & 3rd June low) 0.9568 (fibonacci 61.8% on May-June drop), 0.9445 (July 2nd low), 0.9309 (Fibo resistance), 0.9288 (12th June high), 0.9242 (June 21st low), 0.9128 (13th June pivot high), then 0.9023 (31st Jan pivot low). The next levels of resistance are located at 0.9672 (fibonacci 76.4% level on May – June drop), 0.9763 (17th May high), 0.9842 (22nd May high), 0.9900 (psychological resistance).

Resistance and Support: