FX market focus on tomorrow Non-farm payrolls after ADP report gave a positive picture

The US dollar continued its recovery of the past ten days on Wednesday, helped by very good private sector jobs report for July and ongoing efforts from central bank officials to ease stress in financial markets. But this gain has been limited by a $4 a barrel rebound in crude oil prices after data showed an unexpected decline in US gasoline inventories last week. Forex is focusing on tomorrow non-farm payrolls. Despite the positive employment picture from ADP Employer Services report, few analysts believe market may reverse gains on Friday's non-farm payrolls report. Steps by the Federal Reserve, the European Central Bank and their Swiss counterpart to extend liquidity offers investment banks through January 2009 and introduce a new term auction facility also contributed to overall positive sentiment on the Dollar.
News and Events:


The US dollar continued its recovery of the past ten days on Wednesday, helped by very good private sector jobs report for July and ongoing efforts from central bank officials to ease stress in financial markets. But this gain has been limited by a $4 a barrel rebound in crude oil prices after data showed an unexpected decline in US gasoline inventories last week.

The Oil rebound, after an 18% slide to three months lows in the past ten days, reopened worries that higher energy prices would undermine consumer spending and weaken again the US economy.

EurUsd ended down 0.06% to 1.5582, recovering from yesterday one-month 1.5522. UsdJpy was little changed, +0.06%, at 108.15 after climbing to one-month 108.34 high. UsdChf traded as high as 1.0523, one-month high, before easing to 1.0481 +0.24%. GbpUsd rose only 0.04% to 1.9808, after hitting 1.9746 intraday low.

Forex is focusing on tomorrow non-farm payrolls. The Dollar's gains came after the ADP Employer Services report showed US private employers added 9,000 jobs in July after job losses of 77,000 in June. Economists had expected a reading of minus 60,000. Despite the positive employment picture in the private sector, few analysts believe market may reverse gains on Friday's non-farm payrolls report.

Steps by the Federal Reserve, the European Central Bank and their Swiss counterpart to extend liquidity offers investment banks through January 2009 and introduce a new term auction facility also contributed to overall positive sentiment on the Dollar. But remaining worries about the US financial sector should limit the greenback's advance, traders said.






Today's Key Issues (time in GMT):


05:45 CHF July CPI -0.04 vs 0.2% (MoM)
05:45 CHF July CPI 3.1 vs 2.9% (YoY)
06:00 GBP July Nationwide House Price -1.7% vs -0.9% (MoM)
06:00 GBP July Nationwide House Price -8.1% vs -6.3% (YoY)
07:15 SEK July Consumer confidence 18.2 vs -10.2 (MoM)
07:15 SEK July Manufacture sentiment -9 vs 3 (QoQ)
07:30 DKK July Industrial outlook -4 vs -4
07:30 DKK June Unemployment 1.6% vs 1.7%
08:00 NOK June Credit indicator 13.6% vs 14%
08:00 NOK July Reg’d unemployment NSA 1.8% vs 1.5%
09:00 EUR July Euro-zone Inflation flash 4.1% vs 4% (YoY)
09:00 EUR July Euro-zone Unemployment rate 7.2% vs 7.2% (YoY)
12:30 USD Q2 Core PCE prices 2.2% vs 2.3%
12:30 USD Q2 GDP advance 2% vs 1%
12:30 USD Q2 GDP deflator advance 2.4% vs 2.7%
12:30 USD Q2 GDP sales advance 1.9% vs 0.9%
12:30 USD weekly Initial claims 395k vs 406k
13:30 USD Q2 PCE price index advance 3.9% vs 3.6%
12:30 CAD May GDP 0.2% vs 0.4%
13:45 USD July Chicago PMI 49 vs 49.6
00:00 CHF August 1st, Swiss Market Holiday
The Risk Today:

EurUsd:
Market broke last week 1.5800 support which undermine the current 3-month uptrend. Further weakness might play in 1.5400 – 1.5800 consolidation range. Below, strong support holds 1.5304 13th June low. Key initial resistance holds 1.6000. A break up there would open the way to Trendline resistance 1.6200. Bottom trendline immediate support holds 1.5550.


GbpUsd:
Following Tuesday drop, Cable is still set in short term 1.9800 – 2.0100 trading range. It hit 2.0158 high two weeks ago and 1.9746 low yesterday. Key level holds 2.0100 resistance. On the downside, only a return below 1.9649 might bring again focus on 1.9337 January low and 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Initial support holds 1.9649 July 7th low. Strong support holds 1.9363 20th February and 14th May low.


UsdJpy:
Recovery pushed the market up to 108 last week and 108.34 yesterday. Friday strong Dollar rebound put focus on mid-June 108.59 resistance and 110.10 strong resistance (Trendline). Further advance would open the way toward 111.92 early January high. On the downside, a return below 105 may open the way toward 102.73 support and 100 pivot point.


UsdChf:
Recent Dollar strength pushed last week over 1.0200 and traded over 1.0500 yesterday. Initial resistance holds 1.0523 high. This is reopening the view for a 1.0200 – 1.0600 consolidation range. Renewed weakness below 1.0200 would retest the 1.0000 pivot point and may open the way toward 0.9637 17th March low.



Resistance and Support:



By
Jean-Claude Braha
- ACM Advanced Currency Markets, Geneva, Switzerland