EUR/USD: All Eyes On Non-Farm Payrolls Data

GROWTHACES.COM Trading Positions

EUR/USD: short at 1.2665, target 1.2510, stop-loss 1.2740

USD/CAD: long at 1.1150, target 1.1290, stop-loss 1.1060

AUD/USD: short at 0.8800, target 0.8650, stop-loss 0.8910

EUR/CHF:long at 1.2085, target 1.2160, stop-loss 1.2045

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EUR/USD: Still wide open door for full-blown QE in the Euro zone

(we are short with the target at 1.2510)

• The European Central Bank left interest rates unchanged on Thursday, as widely expected. ECB President Mario Draghi said the central bank is ready to use further unconventional policy tools if needed to stave off the risk of inflation remaining too low for too long. Draghi left the door wide open for full-blown QE before the end of the year. He said that the medium-term inflation outlook has worsened and inflation expectations have fallen.
• Draghi revealed at the press conference after yesterday's meeting details of the already-announced programmes to purchase simple and transparent asset-backed securities (ABS) and a broad portfolio of euro-denominated covered bonds. Covered bond purchases will start later this month while ABS buying will begin in the fourth quarter. The programmes will last for at least two years.
• Friday's data showed Euro zone retail sales jumped much more than expected in August. Retail sales rose 1.2% mom and 1.9% yoy vs. the median forecast of 0.1% mom and 0.5% yoy. Sales contracted 0.4% mom and rose 0.5% yoy in July.
• On the other hand PMI data showed that Euro zone business grew at the slowest rate this year in September. The PMI Composite Output Index fell to a ten-month low of 52.0 in September, down from 52.5 in August and below the earlier flash estimate of 52.3.
• By nation, the strongest expansions were registered in Ireland and Spain. Germany was the only nation covered to register a slight acceleration in the rate of output expansion, as a stronger service sector performance offset a further slowdown at manufacturers. Faster downturns were signalled for France and Italy.
• The PMI showed inflationary pressures remained subdued in September. Average input prices rose at the slowest pace for five months. Output charges fell for the thirtieth month running and to the greatest extent since July 2013.
• The PMI suggests that GDP growth will be about 0.2-0.3% in the third quarter after it stagnated in the second quarter.
• In the opinion of GrowthAces.com the European Central Bank will not wait for the full impact of TLTROs and ABS programmes and will launch full-blown quantitative easing in December.
• The most important event today is the release of Non-Farm Payrolls report. Our forecast is at the level of 230k, slightly above the median market forecast of 215k. Better-than-forecast reading will be supportive for the USD. The EUR/USD recovered yesterday from a two-year low of 1.2571 struck earlier this week, helped mainly by short covering after ECB chief Mario Draghi gave no indication the bank is planning an imminent stimulus programme involving buying of government bonds. In our opinion the recovery had very short-term nature.
• GrowthAces.com maintains its short position on the EUR/USD at 1.2665 with the target at 1.2510.

Significant technical analysis' levels:

Resistance: 1.2699 (high Oct 2), 1.2715 (high Sep 29), 1.2718 (10-dma)

Support: 1.2571 (low Sep 30), 1.2561 (low Sep 6, 2012), 1.2502 (76.4% of 1.2042-1.3995)

USD/JPY gained upside momentum after Kuroda's comments

(we stay flat on the USD/JPY, but outlook is still bullish)

• Bank of Japan Governor Haruhiko Kuroda said on Friday that the JPY's weakening is positive for the Japanese economy on the whole as long as it reflects the actual state of the economy. Kuroda said a weak JPY is a big plus for large exporters and though it's a minus for non-manufacturers that rely on imports, the central bank chief reiterated that the overall economy won't be negatively impacted.
• After the comments from Kuroda the USD/JPY rebounded to 108.98 from steep losses overnight (low at 108.01). There is, however, still some distance from the 6-year peak of 110.09 reached on Wednesday.
• The outlook for the USD/JPY remains bullish. We stay flat but will be looking to go long again on dips.

Significant technical analysis' levels:

Resistance: 109.12 (high Oct 2), 109.62 (hourly high Oct 1), 109.97 (hourly high Oct 1)

Support: 108.36 (session low Oct 3), 108.06 (21-dma), 108.01 (low Oct 2)

GBP/USD weaker after PMI disappoints

(we stay flat on the GBP/USD)

• The PMI services dropped to a three-month low of 58.7 in September from August's nine-month high of 60.5 vs. the median forecast of 59.1. However, the index remained at a level indicative of rapid growth that was well above the survey average.
• What is important for the Bank of England, average input costs were driven higher in September by an increase in supplier prices and rising wage bills. The overall rate of inflation signalled by the survey was the sharpest in four months. The strong pace of job creation signalled by the PMI surveys should eventually lead to higher pay growth and rising personal incomes.
• The PMI suggests that GDP growth will be about 0.8% in the third quarter, slightly lower than 0.9% achieved in the second quarter.
• Deputy Governor of the Bank of England Ben Broadbent said that the central bank does not yet need to raise interest rates as unemployment is still high and wage growth well below pre-crisis levels. He reiterated that the central bank intended to raise rates only gradually when the time came. Dovish comments from Broadbent weighed on the GBP.
• The GBP slipped to a three-week low against the USD on Friday after data showed the expansion in Britain's services sector eased more than expected last month. The GBP/USD is now close to 11-month low of 1.6052 hit on September 10.
• We stay flat on the GBP/USD. We expect the GBP/USD to return to the 1.6052 lows and the next target for the currency bears could be 50% of 1.4814-1.7192 at 1.6003.

Significant technical analysis' levels:

Resistance: 1.6159 (hourly high Oct 3), 1.6175 (hourly high Oct 2), 1.6252 (high Oct 1)

Support: 1.6052 (low Sep 10), 1.6003 (50% of 1.4814-1.7192), 1.5988 (low Nov 14, 2013)

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