FX Quiet on Labor Day by Yan Xu

Markets remain rangebound as US markets were closed on Monday for the Labor Day.

The sterling gained against the dollar after a report showed UK manufacturing PMI index rose from 55.9 to reach a three-year peak at 56.3 in August, reinforcing the fact that the UK economy grows steadily.

Besides, the euro zone manufacturing PMI index dropped slightly from 54.9 in July to 54.3 in August, beating the estimate of 54.2 though.

The Bank of England and the European Central Bank are separately scheduled to release interest rates decisions on Thursday. Following recent financial market turmoil, both of the banks are expected to keep interest rates on hold for now. ECB Chairman Trichet¡¯s post-meeting comments will be scrutinized for any clue as to whether the bank will raise rates by the year-end.

Tomorrow will see US August manufacturing ISM(exp 53.0, prev 53.8) and several reports from the euro zone including July PPI(exp 1.7%, prev 2.3% y/y; exp 0.1%, prev 0.1% m/m) and Q2 GDP (exp 0.3%, prev 0.7% q/q; exp 2.5%, prev 3.1% y/y).

EURUSD will face interim resistance at 1.3650, followed by 1.3680 and 1.37. Additional ceilings will emerge at 1.3730, backed by 1.3750. Support starts at 1.36, backed by 1.3570, 1.3550 and 1.3520. Subsequent floors are eyed at 1.35.

GBPUSD encounters interim resistance at 2.02, backed by 2.0220 and 2.0250. Subsequent ceilings will emerge at 2.0280, followed by 2.03 and 2.0330. On the downside, support begins at 2.0170, followed by 2.0140 and 2.01. Additional floors are eyed at 2.0080, backed by 2.0050 and 2.0020.

USDJPY encounters interim resistance at 116, backed by 116.20 and 116.50. Subsequent ceilings will emerge at 116.50, followed by 116.80 and 117. On the downside, support begins at 115.80 and 115.50, followed by 115.20. Additional floors are eyed at 115, backed by 114.80 and 114.50.