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iFOREX Daily Analysis – 08/02/2016

Published 02/08/2016, 03:52 AM
Updated 09/16/2019, 09:25 AM

The dollar rebounded against a basket of the other major currencies on Friday after the latest U.S. jobs report showed that wage growth accelerated in January, indicating that the Federal Reserve could still raise interest rates this year.

The U.S. Department of Labor reported that average hourly earnings rose 0.5% last month and were up 2.5% on a year-over-year basis. The economy created 151,000 jobs last month, the lowest number since September and less than the 190,000 forecast by economists’. Despite the slowdown in jobs growth the unemployment rate fell to 4.9%, the lowest level since February 2008.

The pick-up in wage growth bolstered the outlook for inflation and increased the likelihood that the Fed could raise interest rates this year.

In the week ahead, investors will be looking to Wednesday’s testimony by Fed Chair Janet Yellen and Friday’s data on U.S. retail sales, for further indications on the strength of the world’s largest economy. Friday’s preliminary report on euro zone fourth quarter growth will also be closely watched, amid heightened expectations for more easing by the European Central Bank in the coming months.

Today markets in China will be closed for the Lunar New Year holiday; in the euro zone, Germany is to release data on industrial production; and Canada is to publish a report on building permits.

EUR/USD

The euro retreated from three month highs on Friday, while halting a four day winning streak, as a relatively strong U.S. jobs report shifted market expectations for the Federal Reserve's next interest rate hike into 2016.

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The currency pair traded between 1.1109 and 1.1246 before settling down 0.43% on the session. Previously, EUR/USD surged more than 2.5% since Wednesday completing its strongest two day rally since the August flash crash.

On Friday morning, the U.S. Department of Labor said nonfarm payrolls increased by 151,000 in January, falling considerably from a downwardly revised 262,000 in December. The sharp declines were blamed in large part to unseasonably warm temperatures over the previous month, which created an unanticipated demand for labor in the construction industry. The unemployment rate, meanwhile, inched down 0.1% to 4.9%, falling to its lowest level since February, 2008.

Today investors’ will focus on Germany data on industrial production while lately in the week Friday’s preliminary report on euro zone fourth quarter growth will be closely watched.

EUR/USD
Pivot:1.118

Support:1.1071.1031.097

Resistance:1.1181.1241.131

Scenario 1:short positions below 1.1180 with targets @ 1.1070 & 1.1030 in extension.

Scenario 2:above 1.1180 look for further upside with 1.1240 & 1.1310 as targets.

Comment:the RSI is bearish and calls for further downside.

Gold

Gold futures ended higher on Friday, following the release of a mixed U.S. employment report for January, with the rate of job creation slowing but wage growth accelerating.

Gold for April settled up 20 cents from Thursday’s settlement of $1,157.6. The precious metal was up 5.04% for the week and has gained 10.75% for the year to date.

Gold’s gains since the start of the year have been underpinned by concerns over a slowdown in global growth, heightened market volatility and more recently by weakness in the dollar, all of which fueled increased safe-haven demand.

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In the week ahead, investors will be looking to Wednesday’s testimony by Fed Chair Janet Yellen and Friday’s data on U.S. retail sales, for further indications on the strength of the world’s largest economy.

Gold
Pivot:1158

Support:115811451139.5

Resistance:118111881195

Scenario 1:long positions above 1158 with targets @ 1181 & 1188 in extension.

Scenario 2:below 1158 look for further downside with 1145 & 1139.50 as targets.

Comment:the RSI lacks downward momentum.

Oil prices were lower on Friday, at the end of a volatile week, as the stronger dollar and concerns that the oversupply of crude will persist weighed.

Crude oil for delivery in March settled down 2.25% for the day. Crude was down 7.83% for the week and is down almost 17% for the year to date.

Oil prices remained under pressure amid uncertainty over a possible deal between the Organization of the Petroleum Exporting Countries and other major producers to cut output in a bid to reduce one of the largest supply gluts in decades. Venezuelan Oil Minister Eulogio Del Pino was to hold talks with his Saudi counterpart Ali al-Naimi on Sunday. Saudi Arabia cut prices for its crude exports to Europe and Asia on Thursday, in a move designed to defend market share, lowering expectations among traders that the kingdom will be willing to participate in a production cut.

In the week ahead investors will be looking ahead to supply data from industry group the American Petroleum Institute on Tuesday ahead of Wednesday’s weekly government report on stockpiles.

WTI Oil
Pivot:32.45

Support:30.363029.39

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Resistance:32.4533.634.43

Scenario 1:short positions below 32.45 with targets @ 30.36 & 30 in extension.

Scenario 2:above 32.45 look for further upside with 33.60 & 34.43 as targets.

Comment:the RSI is bearish and calls for further downside.

S&P 500

U.S. stocks fell precipitously on Friday, amid a romp in technology stocks and the release of a relatively optimistic U.S. jobs report, which increased the possibility that the Federal Reserve could increase the pace of its tightening cycle this year.

The Dow Jones Industrial Average fell 1.29%, while the NASDAQ Composite index crashed 3.25%; while the S&P 500 Composite index lost 1.85%, as eight of 10 sectors closed in the red.

LinkedIn (N:LNKD) Corporation plunged nearly 45%, wiping out approximately $11 billion in market capitalization, after the social networking site for professionals finished with slumping revenues and offered weak forecasts with its fourth quarter results.

For the week, the S&P 500 tumbled by more than 3%, extending considerable losses from the start of the year.

S&P 500
Pivot: 1950

Support: 1821 1738 1650

Resistance: 1950 2010 2080

Scenario 1: short positions below 1950 with targets @ 1821 & 1738 in extension.

Scenario 2: above 1950 look for further upside with 2010 & 2080 as targets.

Comment: the RSI is capped by a declining trend line.

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