Global FX: NFP’s To Decide 2-Week Range Break?

KEY DATA RELEASES TODAY (GMT) :

0930 GBP Trade Balance exp 9.0B v -8.8B
1330 USD Non-Farm Employment Change exp 236K v 252K
1330 USD Unemployment Rate exp 5.6% v 5.6%
1330 USD Average Hourly Earnings m/m exp 0.3% v -0.2%

OVERNIGHT:

The USD index meanwhile continues to consolidate in its 93.50-95.50 range of the past 2-weeks and the major focus today is whether the non-farm payroll report will trigger a breakout. Markets are expecting 233k growth in the job market in January, comparing to prior month’s 252k. Unemployment rate is expected to be unchanged at 5.6%.

Whipsaw price action has dominated the EUR/USD for the past 24 horus, which has been predominately headline driven flows, Yesterday the EUR/USD registered an impressive rally from its lows to print an overnight high of 1.1498 buoyed by a bounce in risk sentiment and another recovery in crude prices, rumours of SNB intervention and a six and half year high in German Industrial orders data which staged a sharp reversal from last months weaker data.

GBP/USD continued to grind higher through much of yesterdays session and has held onto to gains during Asain trade. Yesterdays BOE policy decision to keep rates and the current 375bln asset purchase programme on hold and the accompanying statement that suggest the BOE remained on course to raise rates in the medium term added support the the GBP with further support coming from a two percent rise in UK house prices in January.

The addition of Professor Yutaka Harada as the latest board member to the BOJ was to be viewed as a move which would strengthen and embolden Bank of Japan Governor Kuroda, as it was envisaged that Professor Harada would be seen a a support of Kuroda’s expansionary policies and this would open further likely hood of more policy moves to come. This development has had relevantly little impact on the USD/JPY and we continue to range trade with a downward drift testing the lower end of the last two weeks range.

AUD/USD was the most volatile pair overnight jumping 60pips to 0.7859 following the release of Reserve Bank of Australia’s quarterly policy statement. Although RBA cut its projections for 2015 GDP to 2.25-3.25% v 2.5-3.5% prior and headline inflation to 2-3% v 2.5-3.5% prior, there was little indication of a strong easing bias beyond this week’s surprise 25bp rate cut to 2.25%.

Looking ahead, while US payrolls will be the main focal point today, we also get German industrial production, retail sales & UK trade balance.

PRICE ACTION OVERVIEW:

EUR: 1.1300/1.1250 supports focus on 1.1590 upside corrective equality target
GBP: 1.5325 trendline resistance being tested break target retest of December range lows
JPY: 119 – 117 range lows continue to be pressured but holds on a closing basis for now
CAD: 1.28 caps advance for now, 1.2350 support being retested, break targets 1.22 trendline
AUD: Sharp reversal from trend channel support at .7650, stalls ahead of 0.79 resistance, break targets .8050

KEY TRADES:

ANALYSIS:

EUR/USD Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bearish

• 1.15 resistance continues to be tested while 1.1250/1.13 supports expect one more push higher to the equality corrective target of 1.1590. Loss of 1.12 suggest correction is over and bears will target a retest break of year to date lows
• Order Flow indicators; OBV continues consolidating at lows, Linear Regression and Psychology continue rotating at midpoints, with bullish bias for now
• Monitor price action at 1.1590 retest from below to set short positions to target 1.10

GBP/USD: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bearish

• Price testing key trendline resistance at 1.5325 while this caps to the upside expect bearish trend resumption. A break of trendline resistance opens up a retest of lows of the December range towards 1.55/1.5550
• Order Flow indicators; OBV ticking up from lows, Linear Regression bullish, Psychology bullish but pulling back from recent highs
• Monitoring price action to reset short positions to target retest of year to date low

USD/JPY: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bullish

• Pressure continues to build on the lower end of the well defined range but the range remains intact on a closing basis, 116.65 supports for now with 118.00 as resistance.
• Order Flow indicators; OBV drifts lower but still consolidating above recent highs, Linear Regression and Psychology bearish but no follow through to the downside
• Monitoring price action for a range break and retest to reset positions

USD/CAD: Short Term (1-3 Days): Bullish - Medium Term (1-3 Weeks) Bullish

• 1.2350 support continues being tested, while 1.26 caps expect further corrective price action with a trend line test at 1.22 above 1.26 targets retest of 1.28
• Daily Order Flow indicators; OBV consolidating at highs, Linear Regression and Psychology pierce midpoints from above
• Monitoring price action to set long positions targeting 1.30

AUD/USD: Short Term (1-3 Days): Bearish - Medium Term (1-3 Weeks) Bearish

• Projected trend channel support prompts sharp reversal, resistance at 0.79 contains for now a break targets trendline and horizontal resistance toward .8050
• Order Flow indicators; OBV ticking up form recent lows, Linear Regression and Psychology rotating at midpoints
• Risk free shorts in play, see key trades for details