Investors were cautious ahead of the U.S. non-farm payrolls release later today. Also, China's closely-watched official Purchasing Managers Index, which rose to 53.4 in March from 52.2 in February, was digested as strong PMI data might strengthen the case for more tightening by the People’s Bank of China. On another hand, strong PMI indicates a rebound in manufacturing activity in March after three consecutive months of declines, which could ease concerns over a sharp economic slowdown in the country. The Bank of Japan's quarterly Tankan survey showed the short-term outlook rose from 5 in December to 6 for large manufacturers and from 1 to 3 for large non-manufacturers. The consensus was for 7 and 2 respectively. The Bank of Japan did not give any outlook for the post earth-quake future.
Asian stock markets were mixed on Friday morning and volumes were low ahead of the nonfarm payrolls data. China's Shanghai Composite Index rose on the strong PMI reading to 2954.76, or 0.91%. Japan's Nikkei Stock Average fell 0.48%, Australia's S&P/ASX 200 rose 0.49% and South Korea's Kospi Composite gained 0.68%. Hong Kong's Hang Seng Index rose 0.34%. Taiwan's main index gained 0.25% and India's Sensex added a modest 0.09%. The Global Dow index was 1.78 points under the water to 2184.63, or 0.08% lower. The Dow Jones Industrial Average slipped 30.88 points on Thursday, shedding 0.25% to close the session at 12319.70. Still, index rose 742.22 points, or 6.4% during its best first quarter in a decade, rebounding 6% from the lows visited during mid-March after the Japanese disaster struck. Doubts around U.S. monetary policy weighs on the investors. The Federal Reserve's officials have been hawkishly vocal lately and have strongly indicated that the second round of quantitative easing, or QE2, is scheduled to end this summer. The US$600 billion QE2 program has added liquidity to the market, the money had to find home and chased stocks and commodities. It’s not clear when the Fed will make a move to tighten the monetary conditions. Most analysts believe it won’t happen this year. With the EU and Asian nations are much more likely, almost certain, to start on the tightening cycle this year, the interest rate differential will dampen the US dollar demand.
FX market is in a classic risk-on mode this morning with the lower yielding JPY and USD on the offer side. The USD was lower versus the EUR, GBP, CAD, AUD and NZD by 0.04%, 0.21%, 0.09%, 0.18 and 0.37%, respectively. The Japanese Yen was sold in favor of high yielders and traded lower versus the EUR, GBP and CHF by 0.20%, 0.37% and 0.16%, respectively. The Japanese Yen is much softer this morning against the commdolls, a good indicator of a healthy risk appetite. The USD/JPY trades below the 83.00 handle but the bias is still to the upside.
UK data comes in the form of Manufacturing PMI at 1030GMT and of course everybody is waiting for the US employment data at 1430GMT. ISM Manufacturing report is due at 1600GMT, also an important indicator of economy.

Technical Views


EUR/USD
 
MACD is working out a bearish cross for the fifth day in a row, and still fails at this. RSI is neutral. The top Bolli band at 1.4286 remains the bulls’ target. The 20-day MA at 1.4046 will support the single currency should the USD stage a recovery and a bounce there would be a good point to enter a long. Buying dips is a favored.
Daily Support/Resistance Levels:
Support 3    Support 2    Support 1
1.3987    1.4051    1.4104
Resistance 1    Resistance 2    Resistance 3
1.4221    1.4285    1.4338



GBP/USD

 

The bounce back to the 20-day MA at 1.6138 as was expected has occurred. The GBP/USD traded at 1.6150 yesterday and was sharply rejected there. Now, the 20-day MA is pivotal. A break to the upside will help the sterling to the upper Bolli band at 1.6333. MACD is fighting its way out of the negative territory, but is failing thus far. Bias is cautiously higher to neutral.

Daily Support/Resistance Levels:
Support 3    Support 2    Support 1
1.5842    1.5929    1.5977
Resistance 1    Resistance 2    Resistance 3
1.6112    1.6199    1.6247


USD/JPY

 

The pair reclaimed the ¥83.00 handle, the upper 20-day Bolli band at 84.13 is targeted. The 20-day MA at 81.73 is the best the JPY bulls can hope for as it acts as a strong support and way south from the current levels. MACD is in a solid bullish cross. Bullish bias, buying dips is favored.

Daily Support/Resistance Levels:
Support 3    Support 2    Support 1
82.05    82.31    82.71
Resistance 1    Resistance 2    Resistance 3
83.37    83.63    84.03


XAU/USD, Gold

 

The mega uptrend is intact. The weakening USD and the market’s uncertainty is helping the yellow metal to attract demand from buyers. The immediate target to the upside is the 20-day Bolli band top at 1,447.23 which at this point coincides with the all time high hit on March 24th at 1,447.77. Gold has much room to gain higher as the overbought concerns are not close with RSI at 59.01. Strong bias higher.

Daily Support/Resistance Levels:
Support 3    Support 2    Support 1
1,402.37    1,411.31    1,421.73
Resistance 1    Resistance 2    Resistance 3
1,441.10    1,450.03    1,460.45