U.S. Dollar Under Pressure Prior to Payrolls Report.
The euro and high-yielding currencies held firm on Friday after an improvement in U.S. housing and jobless claims data bolstered investor appetite for risk ahead of key U.S. jobs data today at 12:30 GMT.
Economical News
USD
The U.S currency was on the defensive Thursday, retaining most of the losses sustained the previous day when upbeat data helped lure investors away from safe-haven currencies and assets.
Figures released yesterday showed U.S. pending home sales rose unexpectedly in July and new claims for unemployment insurance fell for a second straight week, which, together with upbeat manufacturing data on Wednesday, eased the gloom over the U.S economy. That lifted stocks, commodities and higher-yielding currencies. However, investors hesitated to take fresh positions ahead of Friday's monthly U.S. jobs report, analyst said.
EUR
The euro headed for a 2nd consecutive weekly gain versus the U.S dollar before a European report that economists said will show retail sales rose for a 3rd month, spurring demand for the region's assets. Retail sales in the euro area increased 0.2% in July, matching the previous month's gain, according to economists' estimations before today's report.
Against the British pound the 16-nation currency traded near a 3-week high on speculation European Central Bank President Jean-Claude Trichet will tomorrow reiterate his comments that the region's recovery is on track.
Market players said that given the fact that the euro zone economy has surprised to the upside, led by a robust recovery in Germany as this higher growth path is priced into the markets, the euro will likely gain further. The next target for the euro is around $1.287, the 38.2% Fibonacci retracement of its fall from its August peak of $1.3334 to its August low of $1.2588. And the target after that would be $1.2923.
JPY
The Japanese yen rose yesterday, extending its gains vs. the dollar after U.S. reports showed an unexpected increase in pending home sales, a decline in initial jobless claims and improved retail sales. The pullback in the dollar came even after a Japanese political candidate reiterated his call for direct currency-market intervention to stem the recently strong yen. Japan's currency stood at 84.35 yen per dollar, up slightly on the day but not far from the 15-year low of 83.58 yen hit late last month.
A sharp drop in dollar/yen, such as 1 to 2% or more in a single day towards the 80 yen level and below, is seen as the most likely scenario that would prompt Japan to intervene and start to buy dollars. Thus many traders expect the market to test the willingness of Japan to intervene, especially if U.S. payrolls data comes in weaker than expected.
Technical Analysis
EUR/USD
A symmetrical triangle pattern has formed on the daily chart with the two of the three vertices beginning on August 18th and August 23rd. The chart pattern is characterized by the slope of the price highs and lows that are converging to form the outline of a symmetrical triangle. Technical indicators help to verify the consolidation pattern. The 20-day exponential moving average has flattened out; combined with a tightening of the Bollinger Bands and a lower Average True Range (14) indicate a decrease in volatility. Traders should wait for a breach of the triangle and target the short term resistance at the August high of 1.2930. A stop should be placed inside the triangle to protect against a false breakout.
GBP/USD
The pair has found support in the recent downtrend at the 100-day exponential moving average. A breach below the line could take the pair to the support at 1.5125. Resistance is found at the downward sloping trend line at 1.5470.
USD/JPY
Despite the slowdown in the depreciation of the pair, the downward trend continues. Support is found at the swing low on the daily chart at 83.60, with a long term target the all-time low for the pair at 79.70. Resistance is located at Monday's high of 85.90.
USD/CHF
Downward pressure continues for the pair as the bearish trend shows signs of strengthening. Long term moving averages such as the 50, 100, and 200 day are downward sloping, indicating the trend is to the downside. Traders should be short with the first support at Wednesday's low of 1.0065, followed by 1.0030.
Wild Card
Gold
Gold prices continue their uptick, targeting the commodity's all-time high at $1,265. The price looks to move higher with the 20-day exponential moving average sloping higher. CFD CFD traders should be long on gold with a protective stop below the support level at $1,231.
Market Trend
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
|---|---|---|---|---|---|---|
| Daily Trend |  |
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| Weekly Trend | |
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| Resistance | 1.2903 | 1.5506 | 85.21 | 1.0212 | 0.9152 | 0.8382 |
| 1.2881 | 1.5477 | 84.90 | 1.0181 | 0.9129 | 0.8358 | |
| 1.2850 | 1.5445 | 84.59 | 1.0150 | 0.9105 | 0.8335 | |
| Support | 1.2778 | 1.5376 | 83.98 | 1.0092 | 0.9058 | 0.8294 |
| 1.2745 | 1.5347 | 83.67 | 1.0060 | 0.9032 | 0.8269 | |
| 1.2710 | 1.5316 | 83.33 | 1.0028 | 0.9010 | 0.8240 |
Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 2010-09-03 | 07:15 | CHF | CPI | m/m | -0.7% | 0.1% |  |
| CPI The Consumer Price Index (CPI) is a measure of the change in the price of goods and services purchased by consumers. It is a gauge for inflation. | |||||||
| 2010-09-03 | 08:00 | EUR | Final Services PMI | 55.6 | 55.6 |  | |
| Final Services PMI The Euro-Zone Final Services PMI indicator is a survey that measures the activity of purchasing managers. | |||||||
| 2010-09-03 | 08:30 | GBP | Services PMI | 53.1 | 53.0 |  | |
| Services PMI The Services Purchasing Manager's Index (PMI) surveys the dealings of purchasing managers in the services sector, with a reading above 50 indicating growth. An increasing indicator can boost a nation's currency. To compile the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Forex traders follow this survey closely because purchasing managers may have insight to periods of economic expansion or contraction. | |||||||
| 2010-09-03 | 08:30 | EUR | Retail Sales | m/m | 0.0% | 0.3% |  |
| Retail Sales This report is a measure of the change in the total value of retail sales. Positive figures indicate economic growth. | |||||||
| 2010-09-03 | 12:30 | USD | Non-Farm Employment Change | -131K | -101K | | |
| Non-Farm Employment Change This report measures the change in the number of employed vs. unemployed persons in all sectors of the economy except the farming industry. It is a leading indicator of economic health. | |||||||
| 2010-09-03 | 12:30 | USD | Unemployment Rate | 9.5% | 9.6% | | |
| Unemployment Rate This figure represents the percentage of potential workers that are currently unemployed and actively seeking a job. This report is typically overlooked as its information is derived from previously released indicators. | |||||||
| 2010-09-03 | 12:30 | USD | Average Hourly Earnings | m/m | 0.2% | 0.1% | |
| Average Hourly Earnings This indicator evaluates the level of inflation incurred by all sectors of the economy (excluding the farming industry) when paying wages to employees. It is a leading indicator of consumer spending because an increase to an employee's real salary signifies an increase to private consumption. | |||||||
| 2010-09-03 | 14:00 | USD | ISM Non-Manufacturing PMI | 54.3 | 53.6 | | |
| ISM Non-Manufacturing PMI Institute of Supply Management (ISM) Non-Manufacturing Purchasing Managers' Index (PMI) or Non-Manufacturing ISM Report On Business is an index based on the survey of around 400 purchasing managers. This excludes the manufacturing industry. They are often asked to rate business conditions including employment, production, prices, and new orders. | |||||||
