NFP To taper or not to taper

Today’s non-farm payrolls report is likely to seal the fate of the tapering debate and whether the Fed will indeed push back on its $85 billion per month in bond purchases at their September meeting. US Treasury 10-year yields broke above the psychological 3% level yesterday following three strong readings from the US employment sector as jobless claims dropped to 323k and to a level not seen since 2007, with the ADP report coming in at 176k which was pretty much the consensus. The services ISM employment subcomponent survey rose to 57 from 53.2 and this has the market looking for a very high NFP number today. The consensus is looking for 180k today with the unemployment rate at 7.4% but I personally think this market has piled into dollars and only a reading above 225k can get this dollar strength extended.

As expected the overnight session has seen some profit taking ahead of the data particularly in USD/JPY, which is going to the most sensitive pair going in to the data. The pair dropped back below 100 with some media speculation that Istanbul is likely to be IOC’s choice for the 2020 Olympic Games, which pushed the Nikkei lower.

In other news there seems to be waning support for Fed Chairman candidate Larry Summers, with some Democrats on the Senate Banking Committee suggesting he will not receive their vote making the Summers/Yellen a very close call.

The G20 meeting has seen a lonely President Obama with more warnings coming from senior states of US strikes on Syria without UN approval and with UK PM David Cameron having his hands tied following his defeat on the vote in Parliament last week it seems the French restaurant in St Petersburg has a reservation for a table for two although I suspect we will hear more from this meeting before its conclusion.

EUR/USD

Supports 1.3100 1.3060 1.3000 | Resistance 1.3205 1.3230 1.3300

USD/JPY

Supports 99.15 98.50 97.80 | Resistance 100.30 100.80 101.65

GBP/USD

Supports 1.5565 1.5520 1.5450 | Resistance 1.5675 1.5720 1.5825