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Data released on Thursday indicated that U.S. private employers hired fewer workers than expected in June and applications for unemployment benefits last week increased for a 3rd straight week. It would therefore appear that there is some 'cooling' in the US Labour Market as it approaches full employment.

The ADP National Employment Report indicated that private sector payrolls increased by 158K jobs in June, down from the 230K positions created in May and below many expectations for a gain of 185K. As a result of these lackluster figures, that are often correlated with Non-Farm Payroll data, USD was sold off during the day.

The G20 meeting starts today in Hamburg, Germany. Of note, will be the first meeting of President Trump and President Putin as well as his first meeting with his Chinese counterpart Xi Jinping. Trade discussions will be 'strained' as many have criticized the US's protectionism stance.

EURUSD gained nearly 0.7% on the day trading from 1.13294 to as high as 1.14244 and is currently trading at 1.1410.

After some early USD buying that saw USDJPY trade up to 113.468, the bears entered the market pushing USDJPY down to 112.882. Since hitting that low USDJPY has retraced to trade above yesterday's highs, currently trading at 113.70, as the Bank of Japan announced its first unlimited fixed-rate bond purchase since February.

GBP benefited from USD selling as it climbed from a low of 1.29192 to post a 0.3% gain on the day to reach a high of 1.2983. GBPUSD is currently trading at 1.2955.

CAD remains strong against USD as the markets have priced in a rise in Canadian interest rates sooner rather than later. USDCAD traded 0.2% lower to establish a low of 1.29227 on the day before retracing higher. Currently USDCAD is trading around 1.2990.

Gold seems to have stabilized above a technical support area around $1,219 and traded as high as $1.229.10 on Thursday before retracing back to currently trade at $1,220.50.

After falling 4% on Wednesday, as Russia claimed to be opposed to any additional production cuts, Oil recovered as the EIA reported Crude Oil inventories falling to 6.299 Million, significantly more than the expected draw of 2.283 Million. US strategic oil reserves are now at a 12-year low, but increased Shale production provides 'insurance' against potential shortages i.e. the US does not need to store as much Oil as it used to. The initial reaction to the report saw WTI trade up from $45.80pb to $46.62pb (a 1.5% gain on the day) before retracing back to close near $45.50pb. WTI has given up yesterday's gains to currently trades around $45.15

Today at 13:30 BST:

Markets have been waiting for today's Non-Farm Payroll release with much anticipation. The recent tightening by the Fed, and their less hawkish tone of late, ensures that market sentiment will change dramatically if this release is wildly outside of the market consensus of 179K. Following May's weak and disappointing release of 138K, the Fed will be looking to see if this release further indicates a weakening economy, which will further impact the Fed's economic 'strategy' for the remainder of this year.

US Unemployment rate (Jun) will also be released. The figure is expected to remain at 4.3%, however, if the US labour market is tightening, we can expect to see a higher release which will further impact US economic policy is the coming months.

Canadian Unemployment (Jun) is expected to remain at 6.6%. Any dramatic change from this expectation will impact Canadian economic policy as the markets are fully expecting an imminent rate rise, possibly as early as next week.

At 14:00 BST Bank of England Governor Carney is scheduled to speak which is likely to cause volatility in GBP.

EUR/JPY - 129.90

Recent wave: wave v of (C) ended at 94.12 and major correction in wave A has ended at 149.79

Trend: Near term up

Original strategy:

Buy at 127.00, Target: 129.00, Stop: 126.40

Position: -
Target: -
Stop: -

New strategy :

Buy at 128.00, Target: 130.50, Stop: 127.40

Position: -
Target:  -
Stop:-

As the single currency has surged again after brief pullback, adding credence to our bullish view that recent upmove is still in progress and upside bias remains for further gain to 130.40-50, then towards 131.00, however, near term overbought condition should prevent sharp move beyond 131.50-60, risk from there has increased for a retreat to take place later.

In view of this, would not chase this rise here and we are looking to reinstate long on pullback as 128.00-10 should limit downside. Below support at 127.44 would abort and signal a temporary top is formed instead, bring correction to 127.00, then towards another previous support 126.49.

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).

Daily Pivots: (S1) 1.2939; (P) 1.2961; (R1) 1.3000; More....

Intraday bias in USD/CAD remains neutral for the moment. Considering bullish convergence condition in 4 hour MACD, break of 1.3013 will indicate short term bottoming. In such case, stronger rebound would be seen back to 1.3164/3346 resistance zone first, before staging another fall. Overall, we'd expect decline from 1.3793 to extend later and sustained trading below 1.2968 cluster support, 61.8% retracement of 1.2460 to 1.3793 at 1.2969 will pave the way to retesting 1.2460 low.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The second leg should have finished at 1.3793. Break of 1.2460 will extend such correction to 50% retracement of 0.9406 to 1.4869 at 1.2048. At this point, we'd look for strong support from there to contain downside and bring rebound. However, firm break there will target 100% projection of 1.4689 to 1.2460 from 1.3793 at 1.1564.

Sunrise Market Commentary

• Rates: After the Bund sell-off, is it now the T-Note future?
  Yesterday, a break below key support in the Bund changed sentiment. Today attention turns to a similar support area for the T-Note future. A strong payrolls report, our favourite, may at least test the area. A break would be a strong confirmation that the trend in yields is on a firm upward trajectory. .
• Currencies: Will payrolls be solid enough to put a floor under the dollar?
  Yesterday, the euro outperformed as European yields broke important technical levels. Today, the focus will be on the US payrolls. We expect a solid report. If so, the dollar could receive additional interest support. The G20 and the correction on the equity markets remain wildcards for global FX trading

The Sunrise Headlines

• The global equity selloff that started in Europe continued in the US with end-of-day losses of the S&P 500 at -0.94%. Asian equities are also losing ground, but the losses are moderate given yesterday’s correction on WS.
• The June US non-manufacturing ISM improved from 56.9 to 57.4, indicating ongoing solid growth in the sector.
• Germany industrial production printed at a strong 1.2 % M/M and 5.0 Y/Yin May against the April 0.7 % M/M (2.8% Y/Y) beating the consensus expectations of 0.2% M/M (4% Y/Y).
• The Bank of Japan said it would buy an unlimited amount of bonds, as it sought to end domestic interest rates being pushed higher by the broad sell-off in bonds. This signals the BoJ’s strong commitment to yield curve control policy.
• The four-nation Saudi bloc pledged it will take new political, economic and legal measures against Qatar after the latter rejected the demand list of the bloc that followed a closing of the ties between Qatar and Iran.
• The main event on the eco-calendar is the US payrolls report. May industrial production figures will also be released for the UK. The G-20 is a wildcard with political tensions at high levels

Currencies: Will Payrolls Be Solid Enough To Put A Floor Under The Dollar?

Solid payrolls to put a floor for the dollar?

Yesterday morning, one could have logically assumed that US data would drive USD trading. It turned out different. The German 10-year yield cleared the important 0.50% mark and interest rate differentials narrowed in favour of the euro. US data were mixed, but only of second tier importance for USD trading. EUR/USD rebounded north of 1.14 and closed the session at 1.1423 (from 1.1352). USD/JPY showed no clear trend as the rise in core yields was counterbalanced by a setback in global equities. The USD/JPY hovered sideways in the lower half of the 113 big figure and closed the session at 113.22.

This morning, Asian equities are joining the correction from WS yesterday, but the losses remain modest. Yesterday, USD/JPY showed no clear trading pattern. This morning, the pair again ignores the correction in equities. The pair profits from the rise in US and European bond yields and trades in the 113.65 area. EUR/JPY also extends its uptrend and is nearing the 130 barrier. The EUR/USD also remains well bid (1.1420 area).

Today, the developments in European bond and equity markets and the G20 still deserve attention as potential drivers for global FX trading but the US payrolls will take centre stage. We expect the payrolls to be solid (at least meeting the consensus estimate of 178 000 net additional jobs) despite yesterday’s disappointing ADP report. The average hourly earnings are expected to rise 0.3% M/M and 2.6% Y/Y. A gradual rise in wages could ease markets’ doubts on the Fed normalisation process. Such a scenario would give the US currency renewed interest rate support. Especially short-term interest rate differentials should re-widen than, which is USD supportive. If so, USD/JPY could rise further. Sentiment on the cross rate is improving as wider interest rate differentials have become at least as important as the swings in equities/sentiment on risk. The question is whether this pattern will continue in case of a ‘real’ risk-off correction. The recent high in EUR/USD should be confirmed as a solid resistance. Having said this, if we are wrong and the payrolls disappoint, the dollar remains very vulnerable.

Technical picture: USD looking for a bottom

A combination of hawkish ECB comments and weaker US eco data pushed EUR/USD above the 1.1300/66 resistance area last week with a new high at 1.1448. Next resistance is seen in the 1.15 area. LT-correction tops are coming in at 1.1616/1.1714. A break would end the long consolidation period that followed the sharp decline of EUR/USD in 2014/early 2015. Such a key area will be difficult to break for now. A return below the 1.13 area would be a first indication of a loss in upside momentum. 1.1119 is the next important support.

The USD/JPY rally ran into resistance in early May and the pair returned lower in the 108.13/114.37 range. The post-Fed USD rebound pushed the pair above the 112.13 correction top last week, but follow-through gains remain modest. So, the jury is still out. A sustained break above 114.37 would improve the ST-picture.

EUR/USD: will payrolls be strong enough to trigger a U-turn in favour of the dollar?

EUR/GBP

Sterling still driven by dollar and euro moves

Yesterday, there were no eco data in the UK today. So, sterling trading was driven by the overall rebound of the euro. The intraday gains of EUR/GBP remained modest though even as the pair regained the 0.88 barrier later in the session. The pair closed the session at 0.8806. Cable drifted cautiously higher yesterday, supported by the rise in EUR/USD. The pair closed the session at 1.2971. One shouldn’t draw firm conclusions from yesterday’s EUR/GBP price action. If anything, the modest rise of EUR/GBP suggests that underlying sentiment on sterling remained constructive short-term.

Today, the UK Halifax House Prices, the May production data and the trade balance data will be published. The data might have some intraday impact on sterling trading. However, data of the month of May are not that timely. So, they won’t change the market assessment on the BoE approach. Decent eco data might be a mildly supportive for sterling. However, we don’t expect them to help break key technical levels. The US payrolls might also trigger intraday volatility in the major sterling cross rates.

From a technical point of view, EUR/GBP set a minor top north of the 0.8854/66 resistance (2017 top). A sustained break didn’t occur, causing a correction on the recent EUR/GBP rebound. A return below the 0.8655 correction low would indicate easing pressure on sterling, but such a break lower will be difficult. A EUR/GBP buy-on-dips approach remains favoured.

EUR/GBP topside test rejected. Not clear trend for now

Download entire Sunrise Market Commentary

AUD/USD – 0.7593

Recent wave: Wave 5 ended at 1.1081 and major correction has commenced for fall to 0.7000 and then towards 0.6500-10

Trend: Near term up

Original strategy :

Sell at 0.7650, Target: 0.7500, Stop: 0.7690

Position: -
Target:  -
Stop: -

New strategy :

Sell at 0.7650, Target: 0.7500, Stop: 0.7690

Position: -
Target:  -
Stop:-

Although aussie found support at 0.7571 and recovered, if our view that top has been formed at 0.7712 is correct, upside should be limited to 0.7650-60 and bring another retreat later, below said support at 0.7571 would add credence to this view, bring retracement of recent rise to 0.7535 support, break there would extend further fall towards 0.7500 which is likely to hold from here..  

In view of this, we are looking to sell aussie on recovery as 0.7650 should limit upside. Above 0.7683 resistance would abort and suggest the retreat from 0.7712 has ended instead, bring retest of this level first, then towards 0.7750. 

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.

Daily Pivots: (S1) 0.7569; (P) 0.7591; (R1) 0.7607; More...

No change in AUD/USD's outlook as price actions from 0.7711 are viewed as a corrective move so far. Intraday bias remains neutral at this point. With 0.7534 support intact, another rise is in favor. Above 0.7643 will bring retest of 0.7711. Break will extend the rally from 0.7328 to 0.7748 resistance and above. At this point, there is no clear sign of range breakout yet. Hence, we'd be cautious on topping again as it approaches medium term fibonacci level at 0.7849. On the downside, break of 0.7534 will indicate near term reversal and turn bias back to the downside for 0.7370 support.

In the bigger picture, we're still treating price actions from 0.6826 low as a corrective pattern. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seen to 55 month EMA (now at 0.8096) and above.

Daily Pivots: (S1) 1.1359; (P) 1.1392 (R1) 1.1454; More.....

EUR/USD is staying in range below 1.1444 and intraday bias remains neutral first. In case of another fall, we'd expect downside to be contained by 1.1291 resistance turned support to bring rally resumption. Break of 1.1444 will extend the rise from 1.0339 low to 1.1615 resistance next. Meanwhile, break of 1.1291 will turn focus back to 1.1118 support.

In the bigger picture, the firm break of 1.1298 resistance further affirm medium term reversal. That is an important bottom was formed at 1.0339 on bullish convergence condition in weekly MACD. Further rise would be seen to 55 month EMA (now at 1.1776). Sustained break there will pave the way to 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516 next. This will now remain the favored case as long as 1.1118 support holds.

Weekly
    •    Last Candlesticks pattern: Window
    •    Time of formation: 24 April 2017
    •    Trend bias: Up

Daily
    •    Last Candlesticks pattern: Hammer
    •    Time of formation: 18 May 2017
    •    Trend bias: Up



EUR/JPY – 129.89




As the single currency has maintained a firm undertone after recent rally above previous resistance at 125.82 (now support), adding credence to our bullish view that medium term rise from 109.49 low is still in progress, hence upside bias remains for this move to extend further gain to 129.45-50 (100% projection of 109.49-124.10 measuring from 114.85), however, near term overbought condition should prevent sharp move beyond psychological resistance at 130.00 and reckon 130.50-60 would hold from here, risk from there has increased for a retreat to take place later.

On the downside, whilst initial pullback to 127.80-85 cannot be ruled out, reckon downside would be limited to 127.00 and the Tenkan-Sen (now at 126.77) would hold, bring another upmove later to aforesaid upside targets. A daily close below the Kijun-Sen (now at 125.77) would defer and suggest a temporary top is possibly formed instead, risk correction to 125.00-10, then 124.45-50, however, reckon downside would be limited to 124.00-10 and price should stay above support at 123.66, bring another upmove later.

Recommendation: Buy at 127.00 for 129.50 with stop below 126.00.

On the weekly chart, last week’s rally above previous resistance at 125.82 did form a long white candlestick, reinforcing our bullish view that the medium term rise from 109.49 low is still in progress and bullishness remains for this move to extend further gain to 129.45-50 (100% projection of 109.49-124.10 measuring from 114.85), then psychological resistance at 130.00, however, reckon upside would be limited to 130.50-60 and 131.00 should hold, the single currency should falter well below previous chart resistance at 132.33), risk from there is seen for a retreat to take place later.

On the downside, although initial pullback to 128.00, then 127.00-10 cannot be ruled out, reckon 126.50 would limit downside and euro shall head north again from there to aforesaid upside targets. A drop below said previous resistance at 125.82 (now support) would defer and risk correction to 125.00, then towards 124.50, however, still reckon downside would be limited to 124.00 and support at 123.66 should remain intact, bring another rally in late Q3.

EUR/USD

Current level - 1.1407

A reversal has been confirmed at 1.1310 and the bias is already positive, for a break through 1.1445 peak, towards 1.1550. Initial intraday support lies at 1.1385.

USD/JPY

Current level - 113.72

The uptrend has been renewed, heading towards 114.30 area. Minor intraday support lies at 113.40.

GBP/USD

Current level - 1.2951

The bias is positive after 1.2889 low, for a rise towards 1.3050 key resistance area. A violation of the latter will challenge 1.3135 zone.

Daily Pivots: (S1) 1.2930; (P) 1.2957; (R1) 1.2995; More...

GBP/USD is still bounded in consolidation from 1.3029 and intraday bias stays neutral. Another fall cannot be ruled out. But downside should be contained above 1.2849 support to bring rise resumption. Break of 1.3029 should then send GBP/USD through 1.3047 to 61.8% projection of 1.2108 to 1.3047 from 1.2588 at 1.3168 next.

In the bigger picture, overall, price actions from 1.1946 medium term low are seen as a corrective pattern that is still in progress. While further upside is now in favor, overall outlook remains bearish as long as 1.3444 key resistance holds. Larger down trend from 1.7190 is expected to resume later after the correction completes. And break of 1.2588 will indicate that such down trend is resuming.