Yesterday’s data releases from the US were a first insight into the more important Non-Farm Payrolls and ISM to come - and the signs were not good. While the correlation between ADP Employment and NFP numbers is historically quite dubious, it almost certainly resets psychology in terms of expectations for Friday’s number; the -254k print (vs. -200k exp.) will start to cast doubts on the forecast for a slowed rate of decline in the NFP (-175k exp., -216k previous), and re-emphasize the struggling state of the labour market. The Chicago Purchasing Manager also unsettled confidence in the US recovery after it managed a meagre 46.1 (vs. 52.0 expected). As this data is compiled by the same department responsible for this afternoon’s ISM data, it may well point to a disappointing afternoon ahead, and remind investors that the US recovery is going to be drawn out and patchy. The rest of this week will be a vital driver of FX markets for the coming month: as August data showed improvements in the US and spurred a hunt for yield that defined most currency movement, the first few numbers out of Sep seem to be reeling that sentiment back in, and further mediocre data could prompt investors to reassess.

Meanwhile this morning’s comments from ECB’s Almunia that the ECB would discuss the EUR gain caused a sharp dip in EURUSD down to 1.4550, the pair should find some support in the 1.4520-30 region, but the direction of this pair continues to hinge on perceptions of the US outlook. Norway gave us even more reason to be bullish on the currency after today’s Unemployment rate dropped to 2.7% in September (2.9% exp. 3.0% prior). Given the recent slew of good data and yesterday’s explicitly hawkish Gjedrem on the wires, a hike in the October meeting seems like a done deal.

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Today's Key Issues (time in GMT):

09:00 EUR E16: Unemployment rate, % (000s, sa) Aug exp: (146) 9.6 prev: 9.5
12:30 USD US: Personal income, % m/m Aug exp: 0.1 (-2.7) prev: 0.0 (-2.4)
12:30 USD US: Personal consumption, % m/m Aug exp: 1.1 (-0.5) prev: 0.2 (-1.6)
12:30 USD US: PCE price index, % m/m (y/y) Aug exp: 0.4 (-0.9) prev: 0.0 (-0.8)
12:30 USD US: Initial jobless claims, thous (4wk ma) 26-Sep exp: 527 (541) prev: 530 (554)
14:00 USD US: ISM manufacturing index Sep exp: 54.0 prev: 52.9
14:00 USD US: Construction spending, % m/m Aug exp: -0.2 (-10.3) prev: -0.2 (-10.5)
14:00 USD US: Pending home sales, % m/m Aug exp: 1.0 (6.7) prev: 3.2 (12.1)

The Risk Today:

 EurUsd The 10 day downtrend is still intact, having sold off from a second time last night from the 1.4650/70 region and again catching support at 1.4550/60 The downtrend now comes into play around 1.4625 so the consolidatory range is getting rather tight. Expect a break one way or the other later this afternoon. Technically the pair has printed a new series of lower lows in the last 24 hours so the bears remain in charge until we break 1.4690 

  GbpUsd After initial short covering on the 9 month uptrend channel and support at 1.5800 at the beginning of the week, the herd mentality kicked in yesterday with core shorts being squeezed back into the resistance at 1.6127. Above there 1.6272 provides a massive hurdle that will likely be greeted by short sellers with open arms. 1.6127 should provide some worthwhile intraday resistance. 

  UsdJpy Looking at the 1 hour chart, there is an obvious resistance at 90.20 and should that be cleared then there will likely be a move to 90.60 where there is more resistance and the first downtrend channel comes into effect. Above there one can expect more shorting around the 91.10 region so patience is key here for the short side. 

  UsdChf Stops on USDCHF at 1.0320 were taken out yesterday, and after pushing against support below 1.0300, the pair bounced strongly on alleged SNB intervention in EURCHF. Resistance overhead lies at 1.0425. 

Resistance and Support:

EURUSDGBPUSDUSDJPYUSDCHF
1.4850 1.6272 91.90 1.0490
1.4770 1.6235 91.10 1.0450
1.4720 1.6135 90.50 1.0425
1.4580 1.5960 90.00 1.0415
1.4560 1.5815 89.15 1.0250
1.4510 1.5770 88.25 1.0190
1.4460 1.5750 87.10 1.0130
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot