Payrolls number today

EUR/USD was unable to break successfully above 1.2870, a resistance level which I have mentioned, and players who longed the Euro based on the breakout of the inverse head and shoulders formed on the 60 min chart, were soon trampled when Euro failed to trade higher. The unwillingness of Euro bulls to take Euro to higher heights is understandable given another data-heavy session today, with US non-farm payrolls (1230 GMT) and ISM manufacturing (1400 GMT) data stealing the limelight from Eurozone manufacturing (0800 GMT) and GDP (0900 GMT) data. Aug NFP forecast is +130K, with employment rate forecast is 4.7%.

Note that traders close their books end of today for the long holiday weekend in the US.

A recap of yesterday’s data: Eurozone’s annual inflation rate fell to 2.3% in Aug from 2.4% in July, in line with consensus, and the ECB left all its key interest rates unchanged at 3%. During the ECB’s press conference, ECB president Jean-Claude Trichet sounded extremely hawkish with his comments, saying that "interest rates are low"; "indicators showing significant improvement in economy"; "tightening needed if scenario is confirmed"; "inflation likely to remain elevated"; "strong vigilance" is warranted as upside risks to price stability prevail. The ECB also upped inflation revisions and GDP revsisions for 2006 and 2007. Seems like the next rate hike from ECB should come early October, as the central bank likes to prepare the markets beforehand.

Meanwhile, US core personal consumption expenditure (PCE) increased 2.4% y/y vs 2.3% in June, which came in line with expectations. The Fed watches this year-over-year index for signs of excessive inflation. Bernanke later came on the wires saying that he would prefer to target headline inflation in the longer term, but in the shorter term, core inflation has special virtues.

Next support for Euro should come around 1.2770, which is supported by the up trendline on the daily chart, then 1.2735, then 1.2700. But if you, like me, have no appetite for EUR/USD or USD/CHF, why not look elsewhere?

NZD/USD just broke out of its daily inverse head and shoulders, and is now heading towards 1.6600, then 1.6685. But with no major economic data coming out of New Zealand, the pair might see a retracement soon. In AUD/USD, a symmetrical triangle has formed on the daily chart, and I think that it could break out very soon, either to the downside or upside, with the latter favoured more.

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