Today’s major headlines

  • Equities saw a bounce after yesterday’s Daly comments but remain stuck waiting for NFP.
  • Yields and the USD are both in limbo since yesterday as markets brace for an important NFP.
  • WTI continues to bleed below key support levels which means patience for bulls.

Key takeaways

  • Equity markets saw a bounce yesterday after Fed’s Daly made some slightly more dovish comments, but markets quickly got over the comments and remain stuck waiting for the NFP report.
  • Markets are coming into this NFP with a decent amount of pre-positioning, which means there could be some minor risk of positioning squaring heading into the print.
  • WTI has resumed its move lower, trading below major support at $83.50. The fundamentals for oil remain supportive for upside in prices, but it’s important to wait for some bullish price confirmation before trying to call a bottom.

FX Today

  • The GBP is leading the major currencies to the upside, but catalysts are very thin right now.
  • The JPY is the weakest of the majors, most likely due to the slightly more constructive risk tone.

Trading strategies

  • With yields very close to new cycle highs and the USD having seen 11 weeks of straight gains, the risk-reward of chasing them higher at these levels is not attractive, even if the data comes in better-than-expected.
  • So, when it comes to FX, our preference would be to look for shorting opportunities in the USD if we see a really bad NFP report today.
  • The other asset to watch is gold, as a big miss in the data could give gold a decent nudge higher if both the USD and yields pull back a bit.
  • The one asset that could be interesting to trade on a really big beat in the claims data is equities, which could see some extension to the downside if the data should surprise meaningfully to the upside.
  • If chasing equities on the short side doesn’t look attractive at the time, then we could consider waiting for USDJPY to push into 150 on a very big beat in the US data and then looking for possible signs of more Ministry of Finance (MoF) intervention to try and take advantage of additional downside in JPY pairs.

Overall, the market is in a bit of a wait-and-see mode today ahead of tomorrow’s NFP report. If you’re looking to trade today, be careful and keep an eye on the NFP release.

This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

All trading carries risk.