Fri, Mar 7 2008, 08:16 GMT
by ActionForex.com Team
Action Insight Daily Report
Dollar to Face Non-Farm Payroll Test
Dollar remains generally weak across the board as markets are turning focus to the highly anticipated employment report from US today. EUR/USD continued to make new record highs and breaches 1.54 briefly today. On the other hand, USD/JPY also resumed recent down trend is continuing it's move towards 100 key psychological level. The non-farm payroll report is crucial to whether the greenback can stage at least a short term rebound, or will be sent further lower.
Markets expect NFP to rebound from -17k, first contraction since Aug 03, to 25k growth in Feb. Unemployment rate is expected to climb back from 4.9% to 5.0%. The leading indicators for NFP were mostly negative. The private ADP showed -23k contraction. Employment components in both ISM Manufacturing and Services Indices stayed in contraction region. Consumer confidence indices continued to show deterioration. Meanwhile, 4 week average of jobless stays above 360k level. Implied chance of rate cut from Fed on Mar 18 have been bouncing between 50bps and 75bps. Another round of weak employment data today will likely have the markets settle on a 75bps and send the greenback sharply lower again.
Another piece of employment data to be focused on is from Canada, which is expected to show 3k growth in Feb, sharply lower from prior month's 46.4k. Unemployment rate is expected to climb from 5.8% to 5.9%. USD/CAD still lacks clear direction after 50bps cut from BOC later today and will look into this report to trigger more decisive moves.
BOJ left rates unchanged at 0.50% as widely expected, by unanimous vote. Fukui had his last policy meeting today already. There is no conclusion on the appointment of the next BoJ Governor yet. In the monthly report, BoJ left economic assessments unchanged and still see economic recovery continuing. Though the tone was a bit downbeat with the bank cutting its views on industrial production and corporate profits. High energy and raw materials prices are expected to continue to post pressures on prices.
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USD/JPY Daily Outlook
Daily Pivots: (S1) 102.14; (P) 103.07; (R1) 103.58; More.
USD/JPY's fall from 108.59 resumes by taking out 102.61 low. At this point, intraday bias remains on the downside as long as 103.09 minor resistance holds. Further decline is expected to 101.22/65 key long term support zone and probably further to 61.8% projection of 108.59 to 102.61 from 104.17 at 100.47. Above 103.09 will turn intraday outlook consolidative first but further decline is still in favor as long as recovery is limited below 104.17 resistance.
In the bigger picture, downtrend from 124.13 is still in progress, towards key medium term support zone of 101.22/65 level. Much attention will be paid there on sign of reversal as USD/JPY approaches this key support zone. Strong rebound from the current level and break of 104.17 resistance will be the first alert that a short term low is in place. Focus will then be on 108.59 resistance in such case and break will indicate that USD/JPY has already formed a medium term bottom.
Though, sustained trading below this support zone and 100 psychological support will indicate that multi-year consolidation pattern that started at 147.68 in 1998 has completed and deeper medium term down trend should then be seen to next psychological support at 90.
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