The US Employment report is due at 8:30 AM ET. The expectation is for 235K vs 248K in September. The August number (also open for revision) rose by 180K.

The ranges in the major currency pairs vs. 22 day averages

The ranges in the major currency pairs vs. 22 day averages

The major currency pairs are trading in a very narrow trading ranges (vs. 22 day averages – around a month’s worth of trading – see chart above) after the dollar move higher in yesterday’s trading.

The market is waiting.

The 38.2-50% of the trend move lower will be watched by traders today.

The 38.2-50% of the trend move lower will be watched by traders today.

The EURUSD fell below the Monday low yesterday (at 1.2438) and extended to a new year low of 1.23640. The 38.2-50% of that trend move lower comes in at the 1.24283-1.24482 area and this should be eyed as a resistance area on the topside in trading today. If the sellers loved it going down yesterday, they should love it at this retracement area too (that will be dependent on the number of course). Above those levels look for the broken trend line and the 100 hour MA at 1.2469 and 1.2482 respectively. The 1.25000 level was the October 3rd low (the stop point on after the September plunge. A move up to that level would make a 133 or so pip trading range for the day. That may slow things down – at least temporarily. Again that is data dependent of course.

On the downside, the low yesterday made new lows from going back to August 21, 2012.

What are the next targets I see?

  1. 1.2457 – This is the low from 2009 and also a low price from 2006
  2. 1.2329 – low from 2008
  3. 1.2131 – 50% of the all time trading range

Looking at the daily chart from the period of consolidation, in 2012, the 1.2286, 1.22407,and 1.2041 (see chart below) are targets.

EURUSD daily chart from 2012 as the price was bottoming.

EURUSD daily chart from 2012 as the price was bottoming.

The current bias is negative for the pair into the report, but risk is of course increased as event, liquidity and market risk will be at high levels.

USDJPY

The USDJPY is mired in a 41 pip trading range today also well below the average of 107 pips (22 day average).

The pair sits in the middle of the up channel from trading this week that has 116.04 as the topside and 114.53 as the extremes.

On the topside a move above the high for the week at 115.50 will simply make that level the new support and traders will continue the move up toward the 116.04 area. A move above will simply open the door for the October 2007 high at 117.93 (there will be other levels along the way but that will my next major target).

On the downside, a move below the 115.00 level will then target the 114.53 lower trend line, followed by the 38.2% of the weeks trading range at 114.378, the 100 hour MA at the 114.28, the 50% of the weeks range at the 114.03 level.

Levels to eye in the USDJPY through the employment report.

Levels to eye in the USDJPY through the employment report.

There are a lot of risk in play with an employment day. The data that we have seen including ADP, Initial Claims and the ISM Employment indices all point to a solid report. Keep an eye on wages. They have not shown strength and are expected to rise by 0.2% and 2.1% for the year. If they rise by more, the market will start to focus on the potential for some wage inflation down the road.

Good luck.