Today is the day a lot of people have been waiting for, the day of the NFP. While there obviously is an expectation for a specific number (202K this month), it is important to see a number which is above the 200K which is considered an important number. Based on the employment data this week it could very well be that the data will disappoint, as both the ADP and the initial jobless claims were worse than expected, although this does is not always reflecting in the NFP.
One factor that has to be taken into consideration is that together with the NFP there is a lot of other data released as well, most notably the unemployment rate, participation rate and wage growth (average hourly earnings). Another point to look out for, are revisions of last month’s number. Sometimes there can be quite a large revision of the data of the previous month, which in turn can have a considerable effect as well, usually as a bit of a belated reaction as the main focus naturally is on the new number.
The trading pattern we usually see a large move, then a small retracement, and then a continuation of the initial move.
The NFP of today is very important, as strong data could build the case for a further rate hike by the FED next month.
Currencies
EUR/USD – moved further down, all the way to the support around the 1.1375 level. The move down came as the USD kept on recovering from its recent losses, but the gains will be capped as we have the NFP today which could shake things up again.
USD/JPY – is moving down as we are able to identify some kind of resistance just below the 107.50 level over the last few days.
GBP/USD – continued to move down as once again the data out of the UK was worse than expected. In part this is blamed on the Brexit fears which influenced the economic activity and outlook. After the referendum the situation should clear up. Technically we remain close to the support around the 1.44 level.
AUD/USD – only around 2 weeks ago we were trading at the highest level in 11 months, but after a set of bad data, a cut in the interest rate and also the expectation for further cuts in the interest rate, we have dropped sharply to the lowest level in 2 month. The expectation for further cuts comes, as the RBA foresees that it is possible it will not reach its inflation target, not even the lower range of its target.
USD/TRY – has been moving sharply up, as the USD is strengthening in general over the last few days, but especially due to the political turmoil in Turkey in recent days, culminating in the stepping down of Turkish Prime Minister Davutoglu.
Indices
Dollar Index – we marked another dip in the downwards trend and this will remain in place until we are able to get firmly above the 95 level. Good NFP data could get us higher as that would increase the chance of a rate hike in June, which in turn should strengthen the USD.
S&P 500 – we are approaching 2 support levels and if we break those levels, the next support can only be found around the 2000 level.
Commodities
Gold – again dropped below the support around the 1276 level, but once more was unable to break below this level and closed on this level again. The NFP will definitely cause volatility and we should be able to see what direction we will go, a new test of the 1300 level, of a move down towards the next support around the 1240 level.
Oil – is dropping once more as production from OPEC countries is rising and is expected to be well over 32 mbpd. In addition Iran is coming producing at a faster pace than was expected and is quickly approaching its set goal of 4 mbpd. We are currently trading around the 44 level again, but when we look at the indicators, we can see that they are starting to turn around, signaling that a possible move further down is possible.