What we are looking for
- USD taking a pause this morning: Markets always tend to be cautious in front of US payrolls. This morning seems to be fitting the norm. USD has been very strong recently, but there is a minor pullback this morning. Whether this turns into something more considerable is likely to depend on the US jobs report.
- Indices find some cautious support: European markets are ticking higher. This comes after a strong intraday rebound into the close on Wall Street. Holding this rebound after payrolls would be key to recovery prospects.
- Commodities rebound as risk appetite tentatively improves: Precious metals and oil has rebounded today on the signs of support for risk appetite. Holding this after the US jobs report will be key.
- Data trading: It is all about the payrolls report today. Headline Nonfarm Payrolls will take the initial market reaction, but also watch for the Unemployment and Average Hourly Earnings to get a full flavour of the jobs report. As ever, don’t forget to mind the spike (it usually lasts about five to ten minutes before some kind of retracement).
Market sentiment has been battered throughout the week. US Treasury yields have been trending higher, strengthening the USD, and weighing on Wall Street. However, a strong intraday rebound into the close on Wall Street is giving some hope. Technically, a “bull hammer” candlestick on the S&P 500 futures chart can be a strong reversal signal, at least near-term anyway.
This rally is reflected across major markets. The USD is slipping back this morning on major forex (as US Treasury yields unwind slightly). This is also helping commodities to build support early today. European indices are following the rebound on Wall Street (even if US futures are cautious this morning). There is another aspect to this though. It is Nonfarm Payrolls Friday today and markets are traditionally cautious in front of the jobs report. If these markets can hold the support following the payrolls data later, this could be a moment for at least a near-term shift in sentiment. A tepid jobs report would help.
Nonfarm Payrolls loom large on the economic calendar today. The US Employment Situation is released at 12:30 GMT. Headline jobs growth is expected to be down from an extremely strong 528,000 in July. However, if the consensus of 300,000 were to be achieved this would again be another strong number and put the Fed firmly on the path to a 75 basis points hike in the September FOMC meeting. Unemployment staying at a post-COVID low of 3.5% would add to the conviction of Fed hawks. Average Hourly Earnings ticking slightly higher again would be another reason.
Market sentiment has improved today: Coming after the rebound on Wall Street, there is a sense of support forming in market markets.
Treasury yields show signs of stalling: After accelerating higher in recent sessions, yields have shown early signs of pulling back this morning. There is nothing decisive yet (unlikely ahead of payrolls)
Fed’s Bostic toes the hawkish line: Raphael Bostic (not a voter until 2024, leans hawkish) maintained the Fed’s recent hawkish bias. He said that there is “more to do on inflation” and the Fed has to “get the economy to slow down”. Being considered marginally hawkish on the FOMC, shows where the balance lies.
Cryptocurrencies remain quiet: Crypto has been very subdued this week. Bitcoin has hovered around the $20,000 mark and is once more around there this morning.
- Nonfarm Payrolls (12:30 GMT) Headline growth of 300,000 jobs is expected in August (down from 5289000 in July.
- US Unemployment (12:30 GMT) The jobless rate is expected to remain at 3.5%
- US Average Hourly Earnings (12:30 GMT) With wage growth of +0.5% in August the year-on-year wage growth is expected to increase to 5.3% (from 5.2% in July)
Major markets outlook
Broad outlook: Sentiment has improved slightly, but essentially has just stabilised ahead of the US jobs report.
Forex: There is a mild sense of support as the USD has given back some of its strength today. EUR is the main beneficiary.
- EUR/USD fell back sharply yesterday but is once more able to find willing buyers to support between 0.9900/0.9950. An early rebound today is back around parity. This continues what is turning into a choppy near-term range between 0.9900/1.0090. The next directional move will come from a decisive break of these levels. The four-hour chart RSI between 35/55 still hints at a negative bias.
- GBP/USD continued to fall yesterday before hitting a low at 1.1498 and engaging a near-term rebound. Old support is new resistance. There is initial resistance around 1.1620/1.1645 and then more considerable around 1.1715/1.1750. We look to sell into strength as the market looks set to retest the post-COVID spike low of 1.1410.
- AUD/USD has decisively broken the support at 0.6840/0.6870 and looks increasingly corrective now. A trend of lower highs has formed and we look to use near-term rallies as a chance to sell. The old support at 0.6840/0.6870 is now a basis of resistance. Initial support at 0.6770 is protecting the July low of 0.6680.
Commodities: Signs of near-term recovery on precious metals, but rallies still look like a chance to sell. Technical configuration suggests oil is also struggling to hold any recoveries.
- Gold has posted a succession of negative candles and the way is clear towards a test of $1680. However, as the daily RSI has hit 30 an early rebound has set in this morning. We would look to use near-term strength as a chance to sell. A five-day downtrend is at $1710 this morning, with initial price resistance between $1709/$1711. The importance of resistance between $1720/$1726 is also growing. Initial support is at $1688.
- Silver has fallen decisively to trade at two-year lows. An intraday rebound from $17.55 has been added as the market has ticked higher this morning. However, reaction around the old lows and overhead supply resistance between $18.14/$18.31 will be an important gauge. Below $17.55 the next support is between $16.95/$17.35. With the RSI hitting 30 there is scope for a near-term technical rally, but we look at rallies as a chance to sell.
- Brent Crude oil has fallen sharply to test the support at $93.25. For now, the support has held as the market has ticked higher early today. However, the configuration of daily RSI suggests that rallies remain a chance to sell. There is initial resistance between $96.00/$97.20 with more considerable resistance between $98.25/$100.60.
Indices: Signs of support and a near-term recovery threatens on Wall Street. The moves look more tentative on European indices.
- S&P 500 futures rebounded from 3903 yesterday to form a “bull hammer”. This is a strong near-term reversal signal and the potential is now for a potential technical rally to kick in. Reaction to initial resistance at 4018 will be a gauge but if that can be overcome then a move towards 4080/4110 could be seen. Bouncing from 3903 means that the support band is now 3903/3950.
- German DAX also posted a “bull hammer” candle, with the market more in consolidation this morning (as other markets are ahead of Nonfarm Payrolls). Anear three-week downtrend sits around 12910 this morning and will be an important gauge for a potential near-term recovery. Initial resistance is between 12790/12875. Support at 12593 protects the July lows 12375/12425.
- FTSE 100 has fallen sharply in the past week, posting a succession of strong bear candles. The market has though found tentative support at 7127 and is consolidating this morning. The RSI has hit 30 (where the big March and June sell-offs found their lows). Moving above 7201 initial resistance would improve, with more considerable resistance at 7245/7260. Below 7127 there is little real support until the June/July lows at 6969/7010.
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.