Forex - Range-Bound Trading Ahead of US Non-Farm Payroll Announcement

Forex News and Events:

FX markets are showing limited price action ahead of non-farm payroll data scheduled to be released today. The consensus regarding Non-Farm Payrolls is at -230k vs. the prior reading of -247k, a moderate improvement. Comments from the Fed warned of prolonged economic weakness particularly in the employment sector. Initial Jobless Claims were slightly better than expected at 570k vs. 574k, but the levels are still atypically high in comparison to non-recessionary environments. Fundamentals still seem to be somewhat displaced, and a negative non-farm payroll figure, could result in a flight to quality into dollar denominated assets like treasuries or other fixed income instruments. Most of the majors are trading higher against the dollar at the current moment but in very tight channels. The EurUsd is higher by 20pips with a 1.47 handle, and the GbpUsd is also slightly stronger at the mid range of 1.63. Central banks are making strong efforts to manage expectations of economic recovery.

The ECB left the official refi-rate unchanged at 1.00% yesterday, and neglected to note whether this level will serve as a floor in near-term. Additionally, the ECB adjusted GDP forecasts to the upside to a range of -0.5 and +0.9 versus the prior estimate of -1 to +0.4. ECB President Trichet noted that it is too early to exit their current strategy, but also stated that the central bank does have the capabilities from a policy perspective to do so when necessary. Certainly mixed signals are being sent to investors, but broader tone within the G10 is one of very cautious optimism. 

Today's Key Issues (time in GMT):

20:30 USD Change in Non-Farm Payrolls (Aug) -230k vs. -274k
20:30 USD Unemployment Rate (Aug) 9.5% vs. 9.4%

The Risk Today:

EurUsd The EurUsd remains resilient finding resistance at the 1.4300 level, and hard support at 1.4216. The upward trend seems to be softening with RSI at 60 and falling, suggesting that the long EurUsd position is a bit crowded. The Euro is trading very close with its 200 day moving average of 1.4271 at 1.4276, as well as showing a retracement to 76% of its previous high of 1.4866 on annualized basis.

GbpUsd The GbpUsd continues to range trade between 1.63 and 1.64, higher by 30 pips in intraday trading to 1.6351. Sterling momentum seems to be neutral as MACD is virtually flat at current level signalling a general lack of direction. The pair is well above its 200 day moving average suggesting a longer-term bull trend, but there a strong caution for longs would be the lack of sustained volume in the marketplace.

UsdJpy UsdJpy price action is somewhat limited with a slight gain of 18pips to 92.82. The pair holds strong support at 92.13, and modest bias to the upside with resistance at 92.96. Using Ichimoku cloud covering to confirm support, we deterimine the baseline at a price of 94.86 and a conversion line of 93.28 using a time scale of one year.

UsdChf Price action in the UsdChf is mostly unchanged from the previous session with the pair only off 7pips to 1.0619. RSI is at crossroads reading a level of 52.14 and limited conviction in either direction. There has been some attractive volatility for Traders with a range of 162pips over the last several days. Some of the movement in price can be attributed to the high correlation the UsdChf hold with gold at a coefficent of -0.847.

Resistance and Support: