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US Payroll data is not the Tapering Decider – Sept 6

September 6, 2013
The strength of Dollar is visible after the release of barrage of supporting US economic news this week. Mario Draghi’s press statement following ECB rate decision that European economy could do better than earlier projected did not come to Euro’s rescue probably because he was quick to counter any earlier rate hike.
Two other factors that may not have worked in favour of European currency is lowering of next year’s growth forecast to 1 pct and his comfort level that inflation rate will remain well below 2 pct. He also did reaffirmed his earlier view on forward guidance for an extended period of time.
Two other factors that may not have worked in favour of European currency is lowering of next year’s growth forecast to 1 pct and his comfort level that inflation rate will remain well below 2 pct. He also did reaffirmed his earlier view on forward guidance for an extended period of time.
Today’s focus will be purely be on US jobs data, which is the major economic event of the week. Though ADP employment data indicated that the private sector employment slowed, as it was slightly below expectation, but we cannot ignore fall in US jobless claims, and  ISM non-manufacturing index hitting highest levels since 2005.
I think US 10-year treasury bond surging beyond 3 pct temporarily is providing better sense of the market, as it continues to hover around 2.99 pct. Though there was lot of effort made in vain by the hedge fund guru’s to halt rising yield to around 2.5 pct. But what is more important to watch is that if 10-year bond yield above the 3 pct level is sustainable or not.
Overall, it is a tough call to make about the number, but keeping in view the US Labor day holiday, 5-10 pct drop against market expectation of non-farm payroll of 175000 should not bother FED too much to reconsider its September tapering plan, if they have one in their sleeves, as unemployment rate of 7.4 pct is likely to remain unchanged.
Any big deviation in Jobs number can result major moves in Gold, US Bonds and Japanese Yen.
EURO @ 1.3135 = Prior to US jobs data Euro should hold around 1.3155-60 levels and only break risk for a test of 1.3180-90 levels. I am expecting Euro up move to be short lived for a dip towards 1.31 zones.
However, in broader terms the levels to watch would be 1.3190 on the ups die break would encourage for a test of 1.3250-80 zones and on the down side break 1.3070 risks for a test of 1.2980-90 zones.
GMT 3:38 – GBP @ 1.5610 = With bias mildly on the upside Cable should remain locked between 1.5565- 1.5670. the crucial levels to watch is 1.5535 and 1.5690.
GMT 3:44 – JPY @ 99.80 = Should hold 99.50 levels for re-test of 100.20-30 levels before data. Later in New York only break 99.20-30 risk for more Yen gain towards 98.30 and move beyond 100. 70-80 is required for more losses towards 101.50.
GMT 3:49 – AUD @ 0.9132 = Should hold around 0.9080, as Aussie could bounce back from around 0.9010 levels, but need to penetrate beyond 0.9180-90 levels for 0.9220.
GMT 3:58 – GOLD $ 1372 = Choppy trading ahead as, initially $ 1375-80 is the level to watch, should hold for a drop towards $ 1360-62, only break risk for test of $ 1350-52 or possibly test of $ 1337 tonight. However move beyond $ 1385 would challenge $ 1408 and break could open gates for $ 1452 next week.

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