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Friday, 5 Aug 2011

US Non-Farm Payrolls on Tap Today

Most significant on today's calendar will be the US publication of its Non-Farm Payrolls (NFP) data. Should today's news foreshadow a modest growth in the largest economy's employment sector, an assessment that seemed nigh impossible just days ago, there is a possibility that more investment will get pushed towards the storage ability of the greenback as investors flee the period of uncertainty wracking Europe.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendnonodowndownnono
Weekly Trendupdowndowndownnoup
Resistance1.45801.674582.200.82751.10800.8880
1.43701.655081.50 0.80801.08000.8800
1.41401.647580.200.78501.05100.8660
Support1.40501.622078.050.76001.03900.8610
1.39401.614077.501.02500.8530
1.38351.600076.251.01000.8360

Economic News

USD - USD Rallies ahead of Friday's NFP Data

The EUR/USD was seen moving towards 1.4130 late yesterday as investors anticipate a return to risk aversion, but also optimism towards today's Non-Farm Payroll report. An uptick in US private sector employment Wednesday added to risk-taking sentiment by many investors, but fears of European debt contagion are overshadowing the rise. Should today's Non-Farm Payroll (NFP) data continue this trend of optimism, we may see the greenback making gains against its rivals as traders return to their traditional store of value en masse.

With the European Central Bank (ECB) holding interest rates steady, and private sector employment rising in the US, the value of the USD appears to be jumping higher as riskier currencies like the EUR dropped in yesterday's afternoon and evening sessions. Bank interventions in Switzerland and Japan are also making the appeal of those safe-havens diminish, helping to lift the dollar in this week's trading.

Most significant on today's calendar will be the US publication of its Non-Farm Payrolls (NFP) data. Should today's news foreshadow a modest growth in the largest economy's employment sector, an assessment that seemed nigh impossible just days ago, there is a possibility that more investment will get pushed towards the storage ability of the greenback as investors flee the period of uncertainty wracking Europe.

EUR - European Central Bank Holds Key Interest Rate Steady

The euro (EUR) was seen trading bearish yesterday after the European Central Bank (ECB) chose to keep its regional Minimum Bid Rate steady at 1.50%. The statement released shortly after the release gave cause for pessimism among investors as ECB President Jean-Claude Trichet hinted that the region's debt concerns were returning to the fore; specifically mentioning woes regarding Spain and Italy and recent ratings downgrades by Moody's Investors Service.

The EUR/USD was seen moving strongly bearish yesterday as a result of the risk averse sentiment that arose from the rate announcement. The price moved from its recent high of 1.4370 to as low as 1.4140 before leveling off mildly. The EUR saw similar losses between 0.2% and 0.6% against its other currency rivals.

Europe's economic calendar today will be significantly lighter than it has been of late. A report on the French trade is scheduled for 7:45 GMT, shortly before the publication of Germany's industrial production figure. Italy will also be releasing data on its preliminary GDP for Q3. Most serious investors are focusing their attention on the American release of Non-Farm Payrolls (NFP), the most impactful news event affecting this week's global economy.

JPY - BOJ Intervention Not Enough to Halt JPY Ascent

The Japanese yen (JPY) was seen moving moderately bearish throughout the day following a move by the Bank of Japan (BOJ) to intervene in the forex market to drive its national currency lower against its primary rivals. The move came as the yen surged beyond previous intervention levels on heightened risk aversion in the global economy due to debt fears in Europe and the United States. The BOJ tends to resist an overly strengthened yen for the gouging effect it has on Japanese exports.

Weakening commodity prices, however, are helping offset the losses from an overly powerful yen, as is the general sentiment that the JPY acts as a solid store of value in times of uncertainty. Given reports that Italy may default in the near future, and that Spain may also follow suit, a period of heightened risk aversion appears inevitable. The JPY, therefore, is positioned to continue gaining despite attempts by the BOJ to prevent such an occurrence. It will be worth watching to see if the BOJ intervenes a second time in the days ahead.

Oil - Crude Oil Prices Falling towards $90 a Barrel

Crude Oil prices met solid resistance Thursday, moving towards $90 a barrel in late trading as sentiment appeared to favor a mild dip in global manufacturing demand. Data releases out of the UK and Europe yesterday were driving many investors back into safer assets as most reports suggested contraction among the major industrial nations of the West would gain momentum. If proven accurate, the new outlook would have oil prices falling back into a bearish channel as demand decreases further.

As investors seek shelter, the value of crude oil, which was seen plummeting all week, may continue to do so before today's close. A sudden jump in dollar values due to this week's sudden return to risk aversion is expected to drive many investors into lower investments on physical assets; driving oil prices even further down. Should Crude Oil sentiment hold steady today, oil prices may see another slump.

Technical News

EUR/USD

The weekly chart shows a bullish engulfing pattern was followed by a false breakout above the trend line falling off of the May and July highs. A pullback from this resistance line formed a doji reversal candlestick which hints at declines in the EUR/USD. The 200-week moving average looks to be the first support at 1.4025 followed by the 200-day moving average at 1.3930. The rising trend line from the May low could also be supportive at 1.3830. To the upside 1.4580 will need to hold to maintain the bearish technical picture. A close above this level could go on to test 1.4700 and this year's high of 1.4940.

GBP/USD

Three weeks of consistent gains for cable are beginning to shift the technical picture from bearish to bullish. Sterling has moved above resistance levels that otherwise would have contained the pair. The first break occurred above the neckline of the head and shoulders pattern at 1.6185 and the second major break occurred at 1.6370 above the previous trend line rising from the May 2010 low. Initial resistance will be the May 31st high at 1.6550 followed by the April high at 1.6745. A move lower for the GBP/USD will likely test the base at 1.6260 followed by the previously broken trend line off of the April high at 1.6140. A breach of 1.6000 could have scope towards 1.5780.

USD/JPY

Yen strength has returned with a vengeance. Last week's candlestick closed with a shaved bottom indicating momentum is to the downside. This week's opening gapped higher but the price managed to hold below the current short term trend line from the July 20th high which comes in at 78.05. Additional resistance may be 79.60 and the 55-day moving average at 80.15 but the downside is calling. Support is found at 76.70 from last week's low followed by the all-time low from March at 76.11. A break here and we move into uncharted territory where the psychological support at 75.00 and 70.00 come into play.

USD/CHF

The Swiss franc is in a similar position as the yen as the USD/CHF moves into uncharted territory. Bias remains to be short but Monday's opening gap higher could create a Harami reversal pattern which may lead to slight gains for the pair. A daily close will be needed for confirmation. Resistance is found at 0.8080 and 0.8275. A move higher to these levels would provide for potential short entries back into the long term downtrend with targets at the big round number at 0.7800.

The Wild Card

Oil

Spot crude oil prices shed a dramatic 6% yesterday. Prices have continued to fall in today's early morning trade hitting a low of $85.21, a 61% Fibonacci retracement from the May 2010 to May 2011 bullish move. Forex traders should note crude oil has supports at $83.80 followed by $80.25. Resistance may be found at $89.00.

Current Time: 08/30 13:41 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
08/31
23:45USD+ Overseas Trade Index 1.8%--3
00:30AUD+ AIG Manufacturing Index50.7--1
00:50JPY+ Capital Spending y/y7.4%--3
09/01
02:30AUD+ MI Inflation Gauge m/m0.2%--1
02:30AUD+ Company Operating Profits q/q3.1%--3
02:35JPY+ Final Manufacturing PMI52.4--1
07:00EUR+ German Final GDP q/q-0.2%--1
07:30AUD+ Commodity Prices y/y-12.1%--1
08:15EUR+ Spanish Manufacturing PMI53.9--3
08:30CHF+ SVME PMI54.3--1
08:45EUR+ Italian Manufacturing PMI51.9--3
09:00EUR+ Final Manufacturing PMI50.8--1
09:30GBP+ Manufacturing PMI55.4--5
09:30GBP+ Net Lending to Individualsm/m2.5B--3
09:30GBP+ M4 Money Supplym/m0.1%--1
09:30GBP+ Mortgage Approvals67K--1
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