Markets remain in consolidation mode in early US session. US ADP employment report showed -20k contraction in the private sector in February, slightly worse than expectation of -10k but not too far. January's figure was revised down from -22k to -60k though. Challenger report showed -77.4% yoy drop in planned layoff in February. Dollar is a bit softer against major currencies but there isn't much momentum for deeper fall. Focus will turn to ISM non-manufacturing index and Fed's Beige Book. (Quick update, ISM non-manufacturing index rose more than expected to 53.0 in Feb. Employment component improved to 48.6 but remained in contractionary region below 50. Markets are steady after the release).

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Greece announced a EUR 4.8b austerity plan today. The measures are split with EUR 2.4b in new revenues from tax hike and EUR 2.4b in spending cuts. Eurozone PMI services was revised slightly lower from 52 to 51.8 in February. Retail sales dropped -0.3% mom, -1.3% yoy in January.

Sterling's recovery continue, supported by positive data. PMI services rose strongly to a two year high of 58.4 in February. Nationwide consumer confidence hit a two year high of 80 in February, much better than expectation a fall to 71. BRC shop prices rose 1.7% in February.

As mentioned earlier, we are preferring Canadian dollar to Australian dollar in the current rally in commodity currencies. So what about New Zealand dollar? We'd like to point out that AUD/NZD has just broke key resistance of 1.2966 (2008 high) decisively this week to resume the long term up trend. We're now looking at further rise to 100% projection of 1.1925 to 1.2836 from 1.2408 at 1.3319. Hence, Kiwi will be the last one to consider if you'd like to go long on commodity currencies.

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USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 88.47; (P) 88.92; (R1) 89.29; More.

With 89.47 minor resistance intact, intraday bias in USD/JPY remains on the downside and further decline is still expected towards 87.36 support. Break there will confirm that whole rebound form 84.81 is finished at 93.74. Also, in such case, the larger down trend is likely resuming for a new low below 84.81. On the upside, above 89.47 minor resistance, however, will indicate that a short term bottom might be formed with bullish convergence condition in 4 hours MACD. Stronger rebound should be seen instead.

In the bigger picture, note that USD/JPY is now back below 55 days EMA (now at 90.44) and continue to stay below 55 weeks EMA (now at 93.42). The bearish case that longer term down trend from 124.13 is still in force remains in favor. Break of 87.36 support will solidify this case and target a new low below 84.81, possibly to 1995 low of 79.5. On the upside, note that decisive break of 93.74 resistance will also have 55 weeks EMA (now at 93.42) firmly taken out too and that will be an important signal that whole long term down trend from 2007 high of 124.13 is over. In such case, focus will turn to 101.43 resistance for confirmation.

USD/JPY