It’s all about the labor market for the US this week, as the final three days of the week each contain a vital signal of where this sector is going. After a stronger than expected ISM Manufacturing Prices on Tuesday, the ADP Change in Nonfarm was released yesterday at a much lower than expected 64K. This paints a gloomier picture of the struggling labor market and is preparing traders for a low Nonfarm Payrolls release tomorrow. Today focus will be on the ISM Non-Manufacturing Index and especially on the employment component of the report. The ISM Index is expected to come around 53.2 after a previous figure of 52.4. This will present the final snapshot of the market and will give traders the opportunity to make a sharper assessment as to where the labor market is going and what will be the NFP release range. Today’s second big release is the Nonfarm Productivity which measures the annualized quarterly growth in labor efficiency for producing goods and services outside the farming sector. The figure is expected to come in at 1.0% after coming in at 1.6 last month. When reviewing the US Market figures, it doesn’t look very bright for the US in the coming future, and the ongoing USD negative rally will probably continue, at least until next week.
There was a flow of negative figures for the European market yesterday, as all of the figures that were expected to be released yesterday, came in weaker than expected. It started with the German Unemployment Rate that went up to 9.2%, continued with the Euro-Zone Manufacturing PMI that came in at 54.4, and ended with the UK Construction PMI that came in at 59.8. All this negative flow of news caused traders to consider the fact that the European market is on its way for lower economic performances after a very long period of prosperity. This means that we might see the reversal but not on the close range as most of the market movement will be derived from US related data, at least until the end of this week. As for today, the UK Services PMI is expected to be released unchanged at 57.6, and so is the Euro-Zone PPI with a consensus of 0.3%. Next week should be very interesting as the data will be more European centric, post the Nonfarm Payrolls release.
The JPY activity remains low as Golden week continues, and liquidity remains on minimum levels. The ongoing general behavior remains JPY weakening, and most of the traders attention will be centered in the US Markets primarily, and a bit on the Euro-Zone. All eyes will be on the US ISM release and on the Nonfarm Payrolls tomorrow.
A bullish trend is expected, as an ascending triangle is forming on the 4 Hour chart. This move will test the 1.3630 resistance level (Fibonacci), and if a break through this level will occur the pair will move even higher
The bearish trend seems out of steam and a bullish move is gathering some new forces. The RSI and Slow Stochastic are in neutral territory and a bearish flag may be forming and still need to be verified in the next few hours. It seems that the pair will move between 1.9900 - 1.9925 and will continue gathering some new momentum.
A double doji is observed on the 4 Hour chart which indicates an upcoming downtrend breakout since a bearish rising wedge is forming. RSI and Slow Stochastic are clearly overbought with negative divergence.
An upcoming bearish trend is expected as a descending triangle is observed on the 2 Hour charts, this trend is expected to break the near support level which is located at 1.2100 and might be headed to 1.2060. In case the pair will reach the 1.2060 second support level the preferable strategy might be going long.
[B]The Wild Card
The RSI and Slow Stochastic are clearly in overbought territory and a descending wedge is also observed. It seems like a good opportunity for Forex traders to gain up to 60 pips on the upcoming bearish trend.