Forex - Main Focus on US NFP

Forex News and Events: After adding a further 50 billion GBP quantitative easing by the BOE the main focus of yesterday was the sell off in sterling across the board as the market looked as this as a negative for the currency. New York trading was subdued ahead of today’s NFP data which will give further direction for the currency. We did not expect major changes in yesterday's ECBs rate decision, and so it proved to be. The Governing Council does not yet seem ready to buy wholesale into our view that there will be positive euro area growth during H209: Mr Trichet several times warned that the stance should be one of "prudence and caution", not least since the data flow could be volatile and since there was concern that the pace of unemployment increases may remain high and thereby affect the chance of recovery. A fairly quiet session flow wise for the currencies a few buyers taking profits in EUR/USD and GBP/USD at the Tokyo open. Offers are now seen in GBP/USD just above 1.6800 and in EUR/USD ahead of 1.4400. AUD/USD rose on the back of hawkish statements from the RBA to a high of 0.8423 hitting a session low at 0.8367. USD/JPY was a non event with no real activity and fairly directionless. Main focus today will be the July US Non-Farm Payrolls data and US Unemployment Rate.

Today's Key Issues (time in GMT): 09:30 GBP PPI Input NSA (MoM) JUL -0.80% vs. 1.50% 09:30 GBP PPI Input NSA (YoY) JUL -10.90% vs. -11.00% 09:30 GBP PPI Output n.s.a. (MoM) JUL 0.00% vs. -0.20% 09:30 GBP PPI Output n.s.a. (YoY) JUL -1.70% vs. -1.20% 09:30 GBP PPI Output Core NSA (MoM) JUL 0.10% vs. -0.80% 09:30 GBP PPI Output Core NSA (YoY) JUL -0.50% vs. 0.10% 12:00 CAD Unemployment Rate JUL 8.80% vs. 8.60% 12:00 CAD Net Change in Employment JUL -20.0K vs. -7.4K 13:30 USD Change in Nonfarm Payrolls JUL -325K vs. -467K 13:30 USD Unemployment Rate JUL 9.60% vs. 9.50% 13:30 USD Change in Manufacturing Payrolls JUL -105K vs. -136K 13:30 USD Average Hourly Earnings (MoM) JUL 0.10% vs. 0.00% 13:30 USD Average Hourly Earnings (YoY) JUL 2.50% vs. 2.70% 13:30 USD Average Weekly Hours JUL 33 vs. 33

The Risk Today: EurUsd USD bearish sentiment is near historic extremes. Although the euro is holding above its previous congestion area, later this month, we expect topping signs against the Dec peak 1.4720. GbpUsd The topping risks are increasing. A move below 1.6580 this level would likely trigger a deeper pullback. UsdJpy range is well defined between 94.30/95.90 and a recovery above 96.40 is needed to change this ranging outlook and for USD/JPY to squeeze higher still. UsdChf USDCHF remains neutral in the short term, though if the USD downtrend is to continue into next week, we prefer to see a close below 1.0590

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.4630 1.6960 97.00 1.0795 1.4500 1.6890 96.60 1.0770 1.4450 1.6820 96.25 1.0735 1.4364 1.6723 95.13 1.0643 1.4280 1.6620 94.35 1.0560 1.4205 1.6575 93.40 1.0485 1.4145 1.6470 93.10 1.0415 S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot