Dollar is mildly firmer in Asian session, along with Swiss Franc and
Yen, as markets become cautious ahead of job data from US today. Asian
equities are broadly lower, following -1% fall in DOW overnight, as
traders take profit ahead of this important piece of economic data.
Economists expect the non-farm payroll report to show 90k expansion in
August while unemployment rate is expected to be unchanged at 9.1%. The
leading indicators to NFP were mixed. ADP showed 91k rise in private
jobs but it has been a rather poor indicator for NFP in recent months.
Four weeks moving average of initial claims remained elevated above 400k
level. Employment component of ISM manufacturing continued to
deteriorate in August and fell to 51.8.
The major surprise today could indeed be in the unemployment rate
figure. Conference Board consumer confidence plunged sharply from 59.2
to 44.5 in August, hitting the lowest level since April 2009. The index
peaked February earlier this year and has been in steady decline since
then. U of Michigan consumer sentiment also dropped sharply from 63.7
to 55.7 in August, hitting the lowest level since November 2008. Both
indicators suggested that consumer fears has intensified in recent
months.
Elsewhere, Jun Azumi is named the new Finance Minister of Japan by
Prime Minister Yoshihiko Noda. Azumi is described as an "unknown" in
several news reports. Azumi's stance on intervention or fiscal policy is
unclear. It's reported that Azumi is chosen because Noda's first choice
has turned down the offer. With Noda's background as the former Finance
Minister, he's expected to have strong views on foreign exchange,
fiscal and budget issues and Azmui is, at this point, expected by
markets to carry on with Noda's work.
Dollar index recovered strongly this week and is back above 74.6 for
the moment. Nevertheless it's still staying in familiar range of
73.42/75.38 and thus near term outlook remains neutral. Markets remain
generally indecisive as on the one hand, there are deep worries of
recession in the US and global economies. On the other hand, while it's
highly likely that Fed will announce new stimulus in September meeting,
it's also highly uncertain what those measures will be. We'll stay
neutral until dollar index breaks out from the mentioned range.
EUR/USD Daily Outlook
Daily Pivots: (S1) 1.4194; (P) 1.4290 (R1) 1.4354;
Intraday bias in EUR/USD remains on the downside for the moment and
further fall should be seen to 1.4054 support first. Break there will
bring deeper decline to 1.3837 key support level. On the upside, above
1.4315 minor resistance will turn bias neutral first. But after all, as
EUR/USD is still staying below 1.4577 resistance, consolidation from
1.4939 is still in progress and more choppy sideway trading would be
seen in near term.
In the bigger picture, EUR/USD is still trading above medium term
trend line support from 1.1875 (now at 1.3941) and thus, rise from there
should still be in progress. Break of 1.4939 should confirm rally
resumption and should send EUR/USD through 1.5143 resistance towards
1.6039 high. However, considering that weekly MACD has been staying
below signal line for some time now, a break below 1.3837 will have the
trend line support, as well as 55 weeks EMA firmly taken out. That would
argue that the rally from 1.1875 has indeed finished and will bring
deeper fall towards 1.2873 support and possibly below.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:50 | JPY | Monetary Base Y/Y Aug | 15.90% | 14.20% | 15.00% | |
| 23:50 | JPY | Capital Spending Q2 | -7.80% | 2.00% | 3.30% | 3.00% |
| 8:30 | GBP | PMI Construction Aug | 52.9 | 53.5 | ||
| 9:00 | EUR | Eurozone PPI M/M Jul | 0.50% | 0.00% | ||
| 9:00 | EUR | Eurozone PPI Y/Y Jul | 6.20% | 5.90% | ||
| 12:30 | USD | Change in Non-farm Payrolls Aug | 90K | 117K | ||
| 12:30 | USD | Unemployment Rate Aug | 9.10% | 9.10% |
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