Global Markets: 

  • Asian stock markets: Nikkei is down 0.30 %, Hang Seng declined 1.10 %, ASX gained 0.30 %, Shanghai is closed for a holiday
  • Commodities: Gold at $1213 (-0.20 %), Silver at $17.10 (+0.30 %), Crude Oil at $91.65 (+0.70 %)
  • Rates: US 10 year yield at 2.43 

News & Data: 

  • Australia AIG Services Index 45.4, Previous: 49.4
  • Australia HIA New Home Sales 3.3 %, Previous: -5.7 %
  • China Non-Manufacturing PMI 54.0, Previous: 54.4
  • Japan Markit Services PMI 52.5, Previous: 49.9
  • Fed’s James Bullard: Not worried by dollars impact on growth at current levels
  • Former BOJ Deputy Toshiro Muto: Current rapid weakening of the Yen is negative for Japan 

FX Overview: 

EUR/USD rallied yesterday to a high of 1.27 after the ECB press conference disappointed Euro bears. Draghi did not reveal anything new nor did he give the market any clues about a possible QE programme. It is clear that the ECB is facing a lot of pressure from Germany and will only use such a tool if it is absolutely necessary. The gains in EUR/USD were limited however, as traders are waiting for the NFP data later today. A disappointing figure would trigger another round of USD long liquidations and probably push the EUR/USD towards 1.2750, as the market can hardly ignore a second bad NFP print, especially given the crowded positioning. A number that is in line with expectations or close to it would likely result in modest USD strength, while a print above 270k would lead to renewed USD strength and a resumption of the EUR/USD downtrend. The key levels to watch for on both sides are 1.2580 and 1.2760.

USD/JPY bounced off the 108.00 level and rallied overnight. Dealers in Asia reported heavy demand from local importers and banks. Bids seen building at 108.20 down to the big figure and with the large stops sub-108.25 cleared yesterday, there is a bit less pressure on the pair. A 108.50-109.10 consolidation seems likely ahead of the key data release.

GBP/USD fell to a low of 1.6110 yesterday and price action looks quite bearish. Unless US data disappoints, a test of 1.6050 seems likely. EUR/GBP rallied above 0.7850 and some shorts got squeezed out. Traders are now keeping an eye on the 0.7880/90 resistance area and a clear break above could pave the way for a 0.80 test.

The commodity currencies continue to perform well, though CAD has weakened against the AUD and NZD as well, perhaps driven by the decline in oil prices. Asia saw light volumes in all three pairs. AUD/USD bids at 0.8750 with larger stops through 0.8740. USD/CAD has solid offers in front of the 1.1220 level, while bids resting into 1.1120. NZD/USD key resistance at 0.7920, while support seen at 0.7830. 

Upcoming Events: 

  • 07:45 GMT – Italian Services PMI (49.6)
  • 07:50 GMT – French Services PMI (49.4)
  • 07:55 GMT – German Services PMI (55.4)
  • 08:00 GMT – Euro Zone Services PMI (52.8)
  • 08:30 GMT – UK Services PMI (59.2)
  • 09:00 GMT – Euro Zone Retail Sales (0.1 % MoM, 0.5 % YoY)
  • 12:30 GMT – US Nonfarm Payrolls (215k)
  • 12:30 GMT – US Unemployment Rate (6.1 %)
  • 12:30 GMT – US Trade Balance (-40.9bln)
  • 12:30 GMT – Canadian Trade Balance (2.0bln)
  • 14:00 GMT – US ISM Non-Manufacturing PMI (58.5)