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Today, investors will probably be sitting on the edge of their seats in anticipation of the US employment report for August. The consensus is for nonfarm payrolls to have risen by 180k, less than the 209k in July, but still a decent number consistent with further tightening in the labor market. Actually, bearing in mind that the ADP report showed that the private sector gained much more jobs than what was anticipated, we see the possibility for the NFP number to exceed its forecast as well. The unemployment rate is expected to have remained very low at 4.3%, while average hourly earnings are forecast to have slowed somewhat in monthly terms, but this would still drag the yoy rate slightly higher. Following the strong upside revision of Q2 GDP and the robust ADP print, another set of encouraging data could push higher the probability for another Fed hike this year.

However, we stick to our guns that the primary determinants of whether the Fed will indeed proceed with another rate increase this year may be inflation data. The minutes of the July gathering showed that the number of policymakers who are concerned with regards to inflation has increased, while data after that meeting showed inflation remained subdued, casting more doubts on whether the softness in recent months can indeed be attributed to idiosyncratic factors. In our view, a strong rebound in inflation is needed before rate-hike expectations rise materially and help the dollar reverse its latest downtrend. The next CPI data are scheduled for the 14th of September, less than a week before the Fed meets to decide on policy. Although a single improvement may not be enough to guarantee a September hike, it could revive hopes that more encouraging prints may allow that to happen in December.

USD/JPY traded lower yesterday after it hit resistance at 110.65 (R1). Nevertheless, the slide was stopped at 109.85 (S1). The pair continues to trade within the sideways range between 108.70 and 111.00 (R2), which keeps the short-term outlook flat in our view. Having said that, today's jobs data, if strong, could help the pair rebound within the range and challenge once again yesterday's high of 110.65 (R1). If the bulls are strong enough to break that level, we would expect them to aim for the 111.00 (R2) barrier, the upper bound of the aforementioned range.

Sources say that the strong euro increases chance of slower QE-exit

Despite Eurozone's inflation accelerating by more than anticipated, the euro came under renewed selling interest on Thursday after sources familiar with ECB discussion told Reuters that “rapid gains by the euro against the dollar are worrying a growing number of policymakers”. They also noted that this raises the chance that that asset purchases will be phased out only slowly and that the ECB is highly unlikely to take any decision at next week's policy meeting.

The reports poured cold water on expectations that the ECB may remove more dovish aspects from its forward guidance when it meets next week. Specifically, there was speculation that this time around, the Bank may remove from its statement the easing bias that QE can be expanded both in terms of size and duration if needed. EUR-traders now turn their attention to ECB Vice President Constancio's speech, scheduled during the European morning today, to see whether his remarks will indeed confirm the aforementioned sources.

EUR/USD slid during the European morning Thursday following the Reuters reports. Nevertheless, the pair hit the key support of 1.1830 (S1) and during the US session it rebounded to test 1.1920 (R1). We maintain the view that the broader path of the pair is to the upside as marked by the uptrend line taken from the low of the 17th of April. Nonetheless, we prefer to remain sidelined today as strong US jobs data combined with more EUR-strength concerns by Constancio could cause the rate to correct lower, even below the key support of 1.1830 (S1).

As for the rest of today's events:

During the European morning, we get the UK manufacturing PMI for August. Expectations are for the index to decline marginally, but to remain at a healthy level. In any case, we don't expect such a print to affect the BoE's policy plans. We also get the final manufacturing PMIs from several European countries and the Eurozone as a whole. In the US, besides the employment data, the ISM manufacturing PMI for August is also coming out and the forecast is for the index to tick down, but to remain at a healthy level. We think that this time, the ISM print may attract less attention than usual, as investors may still be digesting the all-important employment data.

USD/JPY

Support: 109.85 (S1), 109.40 (S2), 109.00 (S3)

Resistance: 110.65 (R1), 111.00 (R2), 111.70 (R3)

EUR/USD

Support: 1.1830 (S1), 1.1730 (S2), 1.1660 (S3)

Resistance: 1.1920 (R1), 1.2000 (R2), 1.2100 (R3)

EUR/JPY - 131.23

Original strategy:

Buy at 130.50, Target: 132.50, Stop: 129.90

Position: -
Target: -
Stop: -

New strategy :

Buy at 130.30, Target: 132.30, Stop: 129.70

Position: -
Target:  -
Stop:-

As the single currency retreated after rising to 131.71 earlier this week, suggesting consolidation below this level would be seen and pullback to 130.70 and then 130.40-45 (38.2% Fibonacci retracement of 128.33-131.71) cannot be ruled out, however, reckon 130.00-05 (50% Fibonacci retracement) would hold and bring rebound later, Above said resistance at 131.71 would signal recent upmove has resumed and extend gain to 132.00-10 but overbought condition should prevent sharp move beyond 132.50-60 and reckon 133.00-10 would hold from here, bring retreat later.

In view of this, would not chase this rise here and we are looking to buy euro on subsequent pullback as 130.30 should limit downside and bring another rise later. Below 130.00 would risk another test of said support at 129.66 but only break there would signal top is formed instead, risk correction to 129.10-15. 

Our latest preferred count is that wave (ii) is ABC-X-ABC which ended at 123.33 and wave (iii) is unfolding with wave iii ended at 100.77, followed by wave iv at 111.57 and wave v as well as the wave (iii) has ended at 97.04, followed by wave (iv) at 111.43 and wave (v) has ended at 94.12 which is also the end of the larger degree v, this also implied the major wave (C) has also ended there, hence major correction has commenced from there with (A) leg unfolding in its lower degree wave c which has possibly ended at 145.69. Under this count, A-B-C wave (B) has commenced with A leg ended at 136.23, wave B at 143.79 and wave C has possibly ended at 149.79.

Our larger degree count is that the decline from 139.26 is wave (C) and is sub-divided into a diagonal triangle i-ii-iii-iv-v with wave i - 105.44, wave ii- 123.33, wave iii - 97.03, wave iv - 111.43, followed by the final wave v as well as the end of wave (C) at 94.12, this also mark the bottom of larger degree wave B. Under this count, major rise in wave C has commenced as an impulsive wave with minor wave III ended at 145.69, wave V is still in progress for further gain to 150.00. Having said that, this so-called wave V could well be the first leg of larger degree 5-waver wave C and this wave C should bring at least a retest of wave A top at 169.97 (July 2008).

AUD/USD – 0.7924

New strategy :

Stand aside

Position: -
Target:  -
Stop:-

Although aussie found support at 0.7871 yesterday and staged a rebound and gain to 0.7960-70 cannot be ruled out, the pair needs to penetrate indicated resistance at 0.7996 to revive bullishness and signal the pullback from 0.8066 has ended, bring subsequent retest of this level which is likely to hold from here. If said resistance at 0.7996 continues to hold, then further choppy trading would take place.

On the downside, below support at 0.7867-71 would signal the rebound from 0.7808 has ended instead, bring another leg of corrective decline towards this level later. Below 0.7808 would signal the wave iv correction from 0.8066 is still in progress for weakness to 0.7786 support, however, oversold condition should prevent sharp fall below 0.7750 and price should stay above i top at 0.7712, bring rebound later. We are keeping our latest bullish count that recent impulsive waves is unfolding as (1 2, (i)(ii), i ii) and may extend headway towards 0.8150.

On the 4-hour chart, the move from 0.8066 is the wave 5 with i: 0.8860, ii: 0.8315, wave iii is an extended move ended at 1.0183, iv: 0.9706 and wave v has ended at 1.1081 (also the top of entire wave 5). The subsequent selloff is the major correction which is unfolding as ABC-X-ABC and 2nd A leg has ended at 0.8848, followed by a-b-c wave B which ended at 0.9758, hence, 2nd C wave is now in progress and indicated downside target at 0.7000 and 0.6950 had been met, so further fall to 0.6710-20 cannot be ruled out.

The pair is holding around 110.00 handle as trading narrows ahead of US NFP data.

Yesterday's strong upside rejection at 110.66 (Fibo 38.2% of 114.49/108.26 descend) and close in red daily candle with long upper shadow signaled that bulls, attracted by daily cloud twist, ran out of steam and taking a breather.

Today's action was so far contained above strong support at 109.75 (4-hr cloud top / 20SMA / Fibo 38.2% of 108.26/110.66 upleg) and bullish sentiment is expected to remain firm while the latter support holds.

Otherwise, sustained break lower would generate initial signal of lower top and spark fresh weakness.

US jobs data are likely to spark stronger activity, with bullish release to boost the greenback through key barriers at 111.00 (former high) and 111.17 (converged 55/100SMA).

Alternatively, loss of 109.75 handle would expose 109.46 (daily Tenkan-sen) and signal an end of corrective phase from 108.26 on sustained break lower.

Res: 110.21, 110.66, 111.00, 111.17
Sup: 109.75, 109.46, 109.18, 108.83

Crude oil is trading lower. Hourly support is given at 45.40 (17/08/2017 high). Strong resistance can be found at 50.41 (31/07/2017). Expected to show continued short-term bearish move.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. Strong support lies at 35.24 (05/04/2016) while resistance can now be found at 55.24 (03/01/2017 high).

Silver's bullish pressures are strong. Hourly resistance is given at 17.32 (18/08/2017 high) while support can be found at 16.58 (15/08/2017 high). The commodity lies in an uptrend channel. Expected to show another leg higher.

In the long-term, the death cross indicates that further downsides are very likely. Resistance is located at 25.11 (28/08/2013 high). Strong support can be found at 11.75 (20/04/2009).

Gold is surging. Hourly support is given at a distance 1251 (08/08/2017 low). Stronger support lies at 1204 (10/07/2017 high). Expected to show continued increase.

In the long-term, the technical structure suggests that there is a growing upside momentum. A break of 1392 (17/03/2014) is necessary ton confirm it, A major support can be found at 1045 (05/02/2010 low)

Bitcoin has set a new all-time high. Hourly support lies very far at 3599 (22/08/2017 low). The road is wide open for another bullish move.

In the long-term, the digital currency has had an exponential growth. There are decent likelihood that the asset will consolidate above $1500. Long-term support is given at $1464 (04/05/2017 low).

EUR/CHF recovery bounce has stalled below downtrend resistance located at 1.1407. Hourly support is located at 1.1260 (04/08/2017 low). Expected to show further consolidation.

In the longer term, the technical structure has reversed. Strong resistance at 1.1200 (04/02/2015 high) has been broken. Yet,the ECB's QE programme is likely to cause persistent selling pressures on the euro, which should weigh on EUR/CHF. Supports can be found at 1.0184 (28/01/2015 low) and 1.0082 (27/01/2015 low).

EUR/GBP's buying pressures continues. Hourly resistance lies at 0.9306 (29/07/2017 high). Hourly support is given at 0.9189 (24/08/2017 low). Downside risks are nonetheless important.

In the long-term, the pair has largely recovered from recent lows in 2015. The technical structure suggests a growing upside momentum. The pair is trading above from its 200 DMA. Strong resistance can be found at 0.9500 psychological level.