Markets are a little mixed ahead of another crucial Nonfarm Payrolls report later. European markets are playing catch up on yesterday’s bounce into the close on Wall Street. This came with an encouraging reaction to reports of further omicron cases in the US. With all this in mind, US futures are consolidating ahead of payrolls. This sense of improved risk appetite in equities is coming at the same time that the US dollar is resuming a strengthening trend amongst forex majors. It will be interesting to see whether this continues after the US jobs report.
- Main drivers: Sentiment is mixed with Nonfarm Payrolls in focus; OPEC+ holds steady but remains “open”; US Government avoids shutdown; no further Fed speakers due before the “Blackout”; Economic calendar: Nonfarm Payrolls and ISM Services later
- Sentiment mixed ahead of payrolls: European indices higher, US futures consolidating; USD strengthening across forex; precious metals struggling, oil rebounding
- OPEC+ holds monthly production increase at 400,000 bpd: this was broadly anticipated. However, OPEC+ has officially left the meeting “open” until the next meeting on 4th January. This means that this decision could in theory be changed at any time. [Oil signs of recovery]
- Senate votes to fund the government: A short term funding bill has been agreed in Congress (House and Senate) to keep funding the government until February. [removes a potential negative risk]
- China Caixin Services and Composite remain in expansion, just: services slip to 52.1 and composite slips to 51.2, although this was slightly better than expected. [Marginally risk supportive]
- Central bank speakers: the FOMC moves into its Blackout Period on Saturday. There are no speakers scheduled for the last day before the blackout.
- Economic Data:
- Nonfarm Payrolls at 1330GMT headline payrolls are expected to grow by 550,000 jobs in November (531,000 Oct). Also, watch for prior revisions. Average Earnings Growth expected to be +5.0% YoY (up from +4.9% in Oct). Unemployment is expected to drop slightly to 4.5% (from 4.6% in Oct)
- ISM Services at 1500GMT the PMI is expected to fall slightly to 65.0 in November (from 66.7 in October)
Broad outlook: there is a sense that USD strength is resuming. This is negative for precious metals. We are also seeing equities tentatively risk positive, with oil also higher.
Forex: USD strength taking hold again this morning. Reaction post-payrolls will be key.
- EUR/USD has drifted back further away from the 1.3370/1.3380 resistance needed to suggest recovery. Holding under growing resistance at 1.1305 today would threaten continued downside again.
- GBP/USD after several recent failed intraday rallies, the negative momentum is threatening again. Decisively below 1.3260 re-opens 1.3195 key reaction low.
- AUD/USD all sense of recovery is being broken as the pair breaches 0.7060 key support. Selling into strength despite the caveat of the overstretched daily RSI under 30.
Commodities: Precious metals recovery has been aborted. Oil hinting at recovery with OPEC+ decision left open.
- Gold another close lower and a breach of a four-month uptrend. Intraday rallies are increasingly being sold into. A test of the key support at $1758 now, with a breach opening $1746 and maybe $1722 again. Resistance is growing now around $1780/$1795.
- Silver consolidations are being sold into as the sharp downtrend continues lower. A close under $21.20 opens $21.40 key support. Resistance $22.60/$23.00.
- Brent Crude oil after picking up into the close last night, the recovery has continued today. Reaction at $73.53 will be key for whether this can continue. Initial support $70.90/$70.35.
Indices: This could be a key day for potential recovery. Wall Street needs to start forming higher lows, European markets need to break through resistance.
- S&P 500 futures a rebound off 4497 now needs to form a higher lo if a recovery can take hold. A move back above 4593 initial resistance would help to shift the corrective outlook.
- DAX is still in a choppy phase of trading, but a positive close yesterday leaves the potential for recovery ope. Reaction to resistance around 15,510 will be key. Holding on to support at 15,122 will also be important.
- FTSE 100 recovery continues to threaten but needs to hold on to a break above 7180/7200 resistance. Near-term higher lows are key too, meaning support at 7086/7096 is important today.