05 August 2016 at 11:32 GMT
The US nonfarm payrolls report set for release at 1230 GMT is the day's main directional driver with the major USD pairs essentially coiled in anticipation. In dollar terms, a print that comes in line with expectation or posts a mild beat is not likely to move the greenback to any huge degree, but a significant shortfall could take the air out of the dollar trade.
We are also operating in what must be considered the long shadow of yesterday's Bank of England outing, where governor Mark Carney cut rates 8as expected), introduced a QE component, and left the door open for further dovishness before the end of this year.
GBP has held support above 1.30 but many hold bearish views in the longer term.
- US Jul change in Nonfarm Payrolls (1230 GMT)
- US Jul Unemployment Rate (1230 GMT)
- US Average hourly Earnings for Jul (1230 GMT)
- US Jun trade Balance (1230 GMT)
- Canadian Net change in Employment for Jul (1230 GMT)
- Canadian Unemployment Rate for Jul (1230 GMT)
EURUSD: we are struggling to break the 55-day moving average at 1.1153. If the NFP release is in line with expectations, eyes can shift to average hourly earnings, where a stronger than expected reading dents the Fed's dovish stance. On the downside 1.1076 (200-day moving average) remains a decent support and an exceptional reading might be needed to end the day below this level. On the top side we have a decent tech resistance at the 1.1232 area, where EURUSD has been rejected twice on August 2 and 3 (100-day moving average). USDJPY: does not really look promising for higher levels, and we continue to watch the 100.57, which we have been following lately, which marks the 50% Fibo level from absolute lows of 2011 to the highs of Abenomics. Close of day and week below could open to sub-100 in USDJPY. AUDUSD
: stronger on the day closed above the 0.76 area which we were looking at as a trigger for higher AUD. If NFP is in line with expectations and brings no USD positive surprises then we will be remaining positive on AUD, as long as we do not close day below 0.7600, or even more importantly not break 0.7490 (100 day moving average).
FX Options volatilities
EURUSD: Vols are under pressure since early morning. The trend is likely to continue after NFP. We do start to see some buyers of 6-month to 1-year-strikes.
GBPUSD: Very limited reaction to BoE's action in the vol space. Risk reversals are favouring GBP puts a touch more, but no big changes.
USDJPY: Vols continue lower and with a lack of economic releases in the coming week, it is hard to see that change. Still feels like 100 could come in play, but it is likely to be a slow grind. Market continue to buy upside gamma as protection in the days after the next BoJ event.
European shares rose on Friday, helped by well-received updates from LafargeHolcim and Hugo Boss.
LafargeHolcim rose 5.8% as it reaffirmed its guidance and beat quarterly profit forecasts thanks to higher selling prices and efficiency savings.
Hugo Boss rose 6.8% after the German fashion house beat forecasts for quarterly operating profit and new CEO Mark Langer said he would close around 20 more stores as a cost cutting drive appears to be bearing fruit.
European indices traded higher this morning. STOXX 600 was up 0.4% while FTSE 100 touched a fresh year-high after the Bank of England cut rates for the first time since 2009 on Thursday and surprised markets by starting a bond purchase programme. Lower GBP
also helped the index to go higher.
Europe's STOXX 600 Bank sector index rose 1%, on track for its third day of gains, despite RBS reported widen losses. Its shares fell 4.5% as it reported widening first-half losses and has scrapped plans to turn its Williams & Glyn unit into a standalone bank, as Britain faces a period of economic instability caused by its Brexit
vote to leave the European Union
Another heavy faller was Novo Nordisk. Its shares dropped 8.4% after the Danish drug maker cut its forecast for full-year profit growth and said it expected tough competition in the United States to pressure prices next year.
Wall Street was gearing up for a mildly positive trading day on Friday, with stock futures tilting higher ahead of what is expected to be a fairly solid US jobs report.
Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.
Men at work, but how many? NFP data today will show. Photo: iStock
— Edited by Clemens Bomsdorf