Daily Report: Markets in Tight Range, Awaiting Non-Farm Payroll

Markets are generally staying in tight range as traders cautiously await the highly anticipated non-farm payroll report from US. NFP is expected to show -105k contraction in August but that's mainly due to dismissal of temporary workers hired by government. The private payroll is indeed expected to show around 40k expansion, still in mild recovery despite slowing from July's 71k. Unemployment are is expected to climb from 9.5% to 9.6%. The leading indicators to NFP were quite mixed. On the one hand, the employment component of ISM manufacturing was impressively strong and breached 60 level to 60.4 for the first time since 2004. Consumer confidence also posted some improvements. However, ADP employment report disappointed markets and showed -10k contraction while jobless claims remained stubbornly high.

In any case, markets will all focus on the headline number of NFP, the private job number as well as the unemployment rate. It's advised to be clear about the overall combined impact on the markets before jumping in. So far, we'd maintain our view that 10480 resistance in DOW is needed to be violated to confirm markets are back in risk-seeking mode. 1.2921 in EUR/USD and 81.92 in dollar index are needed to be taken out decisively to confirm underlying weakness in the greenback. Also, we'd prefer to see yen crosses taking out recent low before confirming resumption in yen strength.

Elsewhere, Swiss CPI was flat mom, rose 0.3% yoy in August. Eurozone PMI services is expected to be unrevised at 55.6 in August. Retail sales are expected to rise 0.2% mom, 0.6% yoy in July. UK PMI services is expected to dropped to 52.9 in August.

While Sterling is the worst performer this week, Canadian dollar isn't much better. CAD/JPY continues to draw support from 78.52 level and is staying in consolidations. But short term outlook remains bearish with 83.48 resistance holds and we'd expect the fall from 94.46 to resume sooner or later. Also, note that decisive break of 78.52 support will also confirm completion of medium term rebound from 2009 low of 68.38 and will pave the way to retest this low.

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.8288; (P) 0.8317; (R1) 0.8356; More.

With 4 hours MACD crossed below signal line, an intraday top should be in place at 0.8346 and bias is turned neutral. Some consolidations could be seen below 0.8346 first. But downside is expected to be contained by 0.8247 support and bring another rise. As discussed before, the fall fro 0.8530 is possibly finished at 0.8141 already. Above 0.8346 will bring another rise to retest 0.8530 high. However, break of 0.8247 will argue that rebound from 0.8141 is finished and turn focus back to this support.

In the bigger picture, whole decline from 2008 high 0.9799 is viewed as a three wave correction from to the larger up trend. There is no confirmation that such correction is finished yet. However, as such correction is expected to conclude inside 0.7693/8186 support zone and hence, focus will be on reversal signal in case of another fall. On the upside, break of 0.8530 resistance will suggest that EUR/GBP has possibly bottomed already and will turn outlook bullish for 0.9410 resistance for confirmation.

Economic Indicators Update

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