Daily Observations: July 6, 2012

DailyFX

The US labor market has been expanding at a slower pace than most have anticipated in recent months, at an average rate of +101.3K from March through May after expanding at an average pace of +223.3K from December through February. Since December, though, the Unemployment Rate has fallen from 8.5 percent to as low as 8.1 percent in April, before bouncing up to 8.2 percent in May. Questions remain over how much the unseasonably warm winter has had on the employment picture, and by now, any of these backlashes should have run its course.

According to a Bloomberg News survey, jobs growth should come in at a mere +100K, above to +69K from May. This has been revised higher from +90K after yesterday’s blowout ADP Employment Change print. Overall, the immaterial figure will leave the Unemployment Rate unchanged at 8.2 percent in June. A stronger figure will be supportive of a stronger US Dollar while a weak figure will inevitably stoke the QE3 fire. The key pairs to watch are EURUSD and USDJPY.

- AUDUSD: The AUDUSD has put in a lower high thus far today. The two consecutive closes above the 100-DMA give scope for a move higher towards 1.0365/85, but with hourly charts indicating a Rounding Top, a pullback may be warranted first. Near-term support comes in at 1.0250/60 (200-DMA, 100-DMA) and then the weekly low at 1.0210/15. A move below would signal an intraweek reversal and signal further losses.

- EURUSD: The Symmetrical Triangle on the daily chart has broken to the downside; it thus appears recent price action off the June 1 low was a mere consolidation and we look to continue lower. With a close below 1.2405/20 on the 4-hour and daily charts, we now look lower towards 1.2285/90 (yearly low). Given the measured move and Fibonacci extensions, we are looking for a move towards 1.1695-1.1875 over the next eight-weeks. Resistance now comes in at 1.2440/80, former support on the Symmetrical Triangle.

- GBPUSD: The GBPUSD’s failure to achieve new highs in the post-Euro-zone Summit world draws into question the underlying strength of the Sterling, and the suggestion is that diverging monetary policies between the Bank of England and the Federal Reserve (with the Bank of England increasingly dovish and the Federal Reserve in wait-and-see mode) are hurting the pair. Resistance comes in at 1.5600/05 (20-DMA) then the weekly high at 1.5720/25. Near-term support lies at 1.5480/1.5500 (yesterday’s low, last week’s low) and 1.5465 (Bollinger Band).

- USDJPY: The USDJPY is working on an Inverted Head & Shoulders pattern off of the June 1 low, with the neckline coming in at 80.60/70. Only a daily close above this level will signal the commencement of this pattern. With the Head at 77.60/70, this suggests a measured move towards 83.60/70 once initiated. Near-term support comes in at 78.90/95 (200-DMA). Price action to remain range bound as long as advances are capped by 80.60/70.

Any other trade ideas and general macroeconomic musings can be found in the Real Time Newsfeed, or by following me on twitter @CVecchioFX.

--- Written by Christopher Vecchio, Currency Analyst

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