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iFOREX Daily Analysis – 06/05/2016

Published 05/06/2016, 06:12 AM
Updated 09/16/2019, 09:25 AM

The dollar rose against a basket of currencies for a third day on Thursday, as traders closed out profitable bets against the greenback before Friday's U.S. payrolls report, which may confirm the view the Federal Reserve will not raise interest rates soon.
We are seeing some short covering lifting the dollar against most major currencies. You can largely attribute it to tomorrow's nonfarm payrolls report," said yesterday Ron Simpson, director of currency research at Action Economics in Tampa, Florida.
Yesterday trading volume was thin, as Japanese markets were shut for the Golden Week holiday. They will reopen on today.
For today economists polled by Reuters forecast U.S. employers likely added 200,000 workers in April, following a 215,000 increase in March, with the jobless rate holding at 5.0%. In the absence of higher wage growth, together with sluggish global demand, Fed policy-makers will likely refrain from raising policy rates at its June 14-15 policy meeting, which would renew bets the dollar would fall, analysts said.

EUR/USD

The euro fell sharply on Thursday, suffering its worst one-day sell-off in three weeks, as currency traders awaited a key U.S. jobs report for further indications on potential divergence between the European Central Bank and the Federal Reserve.

The currency pair traded between 1.1386 and 1.1494, before settling down 0.72% on the session.

On Thursday morning, the U.S. Department of Labor said initial jobless claims increased by 17,000 to 274,000 last week, slightly above consensus estimates of 262,000. The amount represented the largest one-week spike in 16 months. Still, the 4-week Moving Average increased by only 2,000 to 258,000, remaining below the same measure a month ago. It came one day after the ADP Research Institute said private payrolls rose by 156,000 in April, sharply below consensus estimates of 193,000. Over the first three months of the year, the labor market has added an average of 202,000 private jobs per month.

Today investors’ focus will be on NFP report that will be released by the Bureau of Labor Statistics (BLS), analysts expect an increase of 200,000 in nonfarm payrolls following gains of 215,000 a month earlier. Economists are also anticipating a slight dip in the unemployment rate by 0.1% to 4.9%.

EUR/USD ChartPivot: 1.1445Support: 1.137 1.131 1.128Resistance: 1.1445 1.148 1.151Scenario 1: short positions below 1.1445 with targets @ 1.1370 & 1.1310 in extension.Scenario 2: above 1.1445 look for further upside with 1.1480 & 1.1510 as targets.Comment: the RSI is mixed to bearish.

Gold

Gold inched higher on Thursday, halting a brief three-day losing streak amid a resurgent dollar, as investors awaited a key U.S. monthly jobs report at week's end for clearer indications on the strength of the world's largest economy.

The precious metal traded in a broad range between $1,275.50 and $1,288.25 an ounce before settling up 0.30% on the session.
Today the U.S. is to round up the week with the closely watched nonfarm payrolls report, which could give further indications on the timing for the next rate hike by the Federal Reserve. Any rate hikes by the Fed this year are viewed as bearish for gold. The FOMC's next meeting in June will come days before a controversial referendum in the U.K. on its status in the European Union. A vote paving the way for a so-called "Brexit," could have broad implications on global financial and foreign exchange markets.

Gold ChartPivot: 1289.7Support: 1264 1253 1237Resistance: 1289.7 1301.5 1314Scenario 1: short positions below 1289.70 with targets @ 1264.00 & 1253.00 in extension.Scenario 2: above 1289.70 look for further upside with 1301.50 & 1314.00 as targets.Comment: the RSI is mixed with a bearish bias.

WTI Oil

Crude ticked up on Thursday, paring early gains, as dangerous wildfires threatened oil sands production in Canada and a stand-off in Libya impacted the nation's already depleted supply, providing short-term upside pressure for global oil prices.

WTI crude for June delivery traded in a broad range between $43.97 and $46.02 a barrel, before settling up 1.28% on the session.

Crude prices rebounded in Thursday's session as massive wildfires in Alberta headed south, forcing additional evacuations in Canada's sixth-largest province. Earlier on Thursday morning, officials in Fort McMurray, a small town in Northeastern Alberta, declared a State of Emergency, forcing all 88,000 of its residents to evacuate the area. In Libya, meanwhile a stand-off between Eastern and Western rivals continued limiting exports out of the Mediterranean Sea.

Today energy traders will focus on Baker Hughes rig count.

WTI Oil ChartPivot: 44.59Support: 43.2 42.5 41.97Resistance: 44.59 45.35 46.08Scenario 1: short positions below 44.59 with targets @ 43.20 & 42.50 in extension.Scenario 2: above 44.59 look for further upside with 45.35 & 46.08 as targets.Comment: as long as 44.59 is resistance, expect a return to 43.20 and 42.50.

US 500

U.S. stocks gave up early gains to end flat on Thursday, as consumer discretionary shares fell and investors showed caution ahead of the April jobs report.

L Brands (NYSE:LB) which fell 12% led declines in discretionary shares along with Amazon (NASDAQ:AMZN), down 1.8%. The S&P retail index was down 1.5% while the S&P consumer discretionary index fell 0.6%.

For the day the Dow Jones industrial average closed up 0.05%, while the S&P 500 lost 0.02%, and the Nasdaq Composite dropped 0.18%.

Data on Thursday showed the number of Americans filing for unemployment benefits rose more than expected last week, posting the biggest jump in more than a year.

Investors today anxiously awaiting U.S. jobs data for April, for any signs of how the labour market could influence the pace of rate hikes.

US 500 Chart Pivot: 2033 Support: 2033 2006 1970 Resistance: 2083 2111 2130 Scenario 1: long positions above 2033.00 with targets @ 2083.00 & 2111.00 in extension. Scenario 2: below 2033.00 look for further downside with 2006.00 & 1970.00 as targets. Comment: investors have to remain cautious since these levels may trigger profit taking. A bearish divergence is confirmed on the RSI indicator.

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