Markets Stay Range Bound

Daily Analysis - 02/10/2015

Currency Markets Trade Sideways As Unemployment Data Takes Focus

The first trading day of the month and the fourth quarter saw modest risk-off sentiment prevail but markets turned cautious into today’s nonfarm payrolls report which is expected to post another stellar print.

US Equity Markets Recover From Selloff

The Dow Jones Industrial Average slid -0.08% yesterday closing at 16272 while the S&P 500 and the Nasdaq Composite were modestly higher with gains of 0.20% and 0.15% respectively. The S&P 500 futures for December delivery are currently trading at 1915, below the main resistance between 1945 and 1950. The doji reversal pattern that emerged three sessions ago has so far managed to see prices close bullish for two consecutive days, adding to the upside bias. There is a risk of a possible dip in the near-term, especially if payrolls raise expectations of a rate hike, but the bias remains sideways until the resistance at 1980 is broken or key support at 1870 gives way. Needless to say, the US equity markets aptly capture the uncertainty of the rate hikes and today's NFP report could possibly help in setting a short-term bias in the markets.

UK Manufacturing PMI Rises

The latest UK Manufacturing PMI for the month of September beat estimates, printing at 51.5, even though slightly below the prior month’s reading at 51.6 which was revised higher. Despite manufacturing beating consensus expectations, the British Pound failed to post any significant gains during the day closing on a doji candlestick pattern. Today’s data includes the Construction PMI which expected to stay on hold at 57.3, unchanged compared to the prior month. The doji candlestick pattern on the daily chart comes near a strong level of resistance at 1.5130 and 1.5040. A possible bullish close today could see some recovery take place following recent GBPUSD declines with the possibility to retest the previous resistance at 1.5340 and 1.5350. A disappointing print, alongside bullish expectations on the US jobs report could however sour the outlook, potentially pushing the GBPUSD currency pair lower where the next major support level lies at 1.5000.

Australia Retail Sales Gain

The Aussie dollar was supported today with the retail sales numbers rising a healthy 0.40%, up from -0.10% decline last month. The Australian dollar remains strong, posting nearly a three-day rally after the currency fell to lows of 0.6950 earlier. The doji candlestick pattern at these lows, alongside the bullish consecutive closes, could possibly open the way for a further rally with the main resistance coming in at 0.7112. In early trading today, the Aussie was up 0.12% against the Greenback. The Aussie remains supported as expectations for the RBA keeping monetary policy unchanged at this month’s meeting remains high. The commodity risk currency managed to hold ground yesterday after a steep drop in commodities following the weak US ISM manufacturing figure for September. The soft ISM print highlights the weakness in the manufacturing sector and could possibly sour the NFP job number due later.

Markets Look to September Jobs

The Bureau of Labor Statistics is set to release US Non-farm payrolls data today with the consensus expectations showing the US economy added 203,000 jobs in the month of September. The unexpected dip in unemployment last month to 5.1% is expected to stay unchanged following this month's reading but could fall further if labor force participation rates drop. With the Federal Reserve holding off from lifting rates at its monetary policy meeting last month, a better than expected jobs report will likely serve as evidence that the US economy is steadily improving with the unemployment rate trends closer to the Fed's NAIRU of 5.00% full unemployment. The US Dollar could swing either way given the outcome of the jobs report. The USDJPY currency pair is of particular interest as the currency pair has been consolidating sharply within a descending triangle.