On the surface of it, today looks like a cautious trading session as markets wait on tonight’s US employment data.

The query for traders is whether the assumption of a relatively steady session will be threatened by a continuation of the selling that has persisted in the Australian market for over a week. Yesterday, the ASX 200 index returned to the peaks it established in early May. Downward momentum may continue if recent profit taking pushes the index below this support.

Downward momentum is also a feature of the oil market. The end of the US driving season and the prospect of building inventories create downward risk for the oil price and may see further pressure on energy stocks today.

The weaker than expected ISM manufacturing index introduces a note of caution on the US economy leading into tonight’s employment data. The weak PMI read in August has interrupted a trend of low gear expansion over recent months. The US manufacturing sector is struggling to gain momentum despite solid consumer spending. Australia’s manufacturing PMI also dropped sharply yesterday suggesting that the benefits of earlier declines in the currency are receding.

Tonight’s US unemployment data, coincides with a significant level on the gold chart.  The weaker than expected US manufacturing PMI and resultant $US weakness has seen gold show signs of bouncing off the support of its January high and a 38.2% Fibonacci retracement of the most recent rally.