USD Unchanged Ahead Of NFP
Swissquote Bank Ltd | Oct 03, 2016 07:45AM ET
Be ready for a week of US data (by Arnaud Masset)
After a dovish Fed at the September meeting and lacklustre economic data from the US economy, the market is eagerly awaiting the upcoming nonf, which is due for release later this week. Indeed, the market has been looking for a sweet spot in the US economy and it seems that the job market is still the best candidate. However, before NFP Friday, we’ll get the final read of September manufacturing PMI, which is expected to come in flat at 51.4, while construction spending is expected to have accelerated 0.3% in August. ISM manufacturing should improve slightly in September after having slid below the 50 threshold that separates extension from contraction. The manufacturing gauge should print at 50.3, up from 49.4 in August.
On the job market, the September ADP report will be released on Wednesday and should show that the US economy created 163k private jobs over the previous month. On Friday, the NFPs are expected to show further strength of the US job market with an increase of 170k new jobs.
The market will be very sensitive to these jobs figures as the Federal Reserve would be unable to lift short-term interest rates if the jobs market eventually comes under pressure. Over the past few months, the job market has been sending mixed signals, raising doubts that the situation has really further room to improve. Since mid-August EUR/USD has been trading range-bound at between 1.1123 and 1.1366. The pair may escape that range to the downside should NFPs come in well above the median forecast.
Swiss sight deposits suggest FX intervention (by Peter Rosenstreich)
Switzerland printed a slew of data this morning. Real retail sales for August fell more than expected by -3.0% versus -1.7%, prior read -2.2%. However, manufacturing PMI came in at 53.2 against 51.8 expected and 51.0 prior read. Finally, domestic sight deposits surged 452.96 bn from 444.6 bn, basically confirming that last week’s “suspicious” EUR/CHF spike was actually SNB intervention. Uncertainty surrounding Deutsche Bank (DE:DBKGn) triggered an exodus from the euro into the regional safe-haven currency of choice. The SNB has been intervening regularly to halt excessive CHF appreciation. The last major FX intervention was post Brexit. While SNB negative interest rates do typically dissuade investors during times of normal volatility, rogue fear trades will continue to benefit the CHF to the behest of the SNB. The Swiss economy continues to prove resilient against the backdrop of weaker macro demand and stronger CHF. However, there are marginal signals that the overvalued CHF is shifting consumer and corporate spending behaviours.
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EUR/USD - Recovery bounce.
The Risk Today
Peter Rosenstreich
EUR/USD has bounced sharply near the key support area 1.1153 (rising trendline). However, a further decline towards the support at 1.1123 favoured as long as prices remain below the resistance at 1.1288 (declining trendline). Strong support can be found at 1.1046 (05/08/2016 low). In the longer term, the technical structure favours a very long-term bearish bias as long as resistance at 1.1714 (24/08/2015 high) holds. The pair is trading in range since the start of 2015. Strong support is given at 1.0458 (16/03/2015 low). However, the current technical structure since last December implies a gradual increase.
GBP/USD continues to move within its declining channel. An hourly support lies at 1.2921 (23/09/2016). Hourly resistances are given by the declining channel located at 1.3026. Another support stands at 1.2947. Expected to show continued downside pressures. The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.
USD/JPY continues to consolidate above its key support at 100.00. Technical pattern remains focused on further downside. Hourly resistance is given at 101.81 (29/09/2016) then 102.79 (21/09/2016 high). Psychological support at 100 is not far away. A key support lies at 99.02 (24/06/2016 low). Expected to further weaken. We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).
USD/CHF continues to move broadly sideways, as can be seen by the failure to break the hourly resistance at 0.9885 (01/09/2016 high), the short-term technical structure is negative. There are alternating periods of strong and low volatility and the pair seems without direction. Key resistance lies at 0.9956 (30/05/2016 high). Support can be located at 0.9662 (28/09/2016 low) then 0.9662 (26/09/2016 base low). In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.
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