Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Investors Lock Their Gaze On The U.S. Nonfarm Payrolls

By JFD TeamMarket OverviewMay 07, 2021 03:53AM ET
Investors Lock Their Gaze On The U.S. Nonfarm Payrolls
By JFD Team   |  May 07, 2021 03:53AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Global equity indices continued trending north yesterday as hopes of global economies reopening remained elevated. Investors’ morale got an extra boost after the US initial jobless claims came in better than expected. Today, all eyes will be on the US employment report for April as investors look for signs as to how the US economy continues to perform. Yesterday, the BoE slowed down its QE purchases, but added that this is not a material policy change.

Equities Keep Gaining Ahead Of The US Jobs Report

The US dollar traded lower against all the other G10 currencies on Thursday and during the Asian morning Friday. It lost the most ground versus CAD, SEK, CHF, NOK, and AUD in that order, while it underperformed the least against GBP.

USD performance G10 currencies
USD performance G10 currencies

The weakening of the US dollar, combined with the strengthening of the risk-linked Loonie and Aussie, suggests that markets traded in a risk-on fashion yesterday and today in Asia. However, the strengthening of the Swiss franc points otherwise. So, in order to get a clearer picture with regards to the broader market sentiment, we prefer to turn our gaze to the equity world. There, major EU, and US indices closed in the green, with the Dow Jones hitting a fresh record high. The only exception was STOXX 50, which slid 0.08%. The positive appetite rolled somewhat over into the Asian session today as well.
Major global stock indices performance
Major global stock indices performance

Hopes of global economies reopening remained elevated with investors’ morale getting an extra boost after the US initial jobless claims for last week fell below 500k for the first time since the coronavirus pandemic started more than a year ago. That said though, positive economic data are a double-edged sword for investors.

On the one hand it means that the economy is performing better than previously anticipated, which is positive for risk sentiment, while on the other hand, it could revive fears that inflation may accelerate faster than previously anticipated and force the Fed to start normalizing monetary policy earlier. This is a negative for risk appetite.

With that in mind, today, investors are likely to lock their gaze on the US employment report for April. Nonfarm payrolls are expected to have accelerated to 978k from 916k in March, while the unemployment rate is anticipated to have declined to 5.8% from 6.0%.

US unemployment rate
US unemployment rate

This is likely to add more credence to the view that the US economy is recovering from the coronavirus-related damages at a fast pace, but it could also tempt some participants to start thinking as to whether the Fed should consider normalizing its policy earlier.

Something like that could take the US dollar slightly higher and equities lower, but we don’t expect it to prove a game changer. We would consider such a counter reaction as a corrective move. 

We stick to our guns that with Fed officials repeatedly highlighting that it is too early to start tapering talks, President Biden willing to pass more supportive bills, and the vaccination programs around the globe progressing at a decent pace, the broader market sentiment is very likely to stay supported.

DJIA Technical Outlook

The Dow Jones Industrial Average index accelerated to new highs yesterday, while balancing above a newly-established short-term tentative upside line, drawn from the low of May 4. The price tested the 34578 hurdle, which is now the new high on the cash index. Given the strong upmove, we might see a small correction lower, but if the above-mentioned upside line stays intact, another push higher may be possible.

As discussed above, a small decline could bring the price to the aforementioned upside line, which if holds, could help the bulls get back into the game. If so, DJIA might accelerate again, initially aiming for the current all-time high, at 34578, a break of which would confirm a forthcoming higher high and place the index into the uncharted territory.

Alternatively, if the index breaks the aforementioned upside line and falls below the 34330 zone, marked by the high of May 5, that could open the path to some lower areas. DJIA may drift to yesterday’s low, at 34187, a break of which might clear the path to the 34035 level, marked by the low of May 5. Around there, the price could also test another short-term tentative upside line drawn from the low of Mar. 25, which may provide additional support.

Dow Jones Industrial Average cash index 4-hour chart technical analysis
Dow Jones Industrial Average cash index 4-hour chart technical analysis

BOE Says That QE Slowdown Is Not A Material Change

Yesterday, apart from the US initial jobless claims, we also had a BoE monetary policy decision. British policymakers kept interest rates unchanged at 0.10%, but they proceeded with a technical change in which the pace of weekly bond purchases slows down.

That said, they reaffirmed that "as measured by the target stock of asset purchases, that stance remains unchanged", adding that the QE slowdown is not a material change and that they are ready to reverse it if deemed necessary. With regards to their economic projections, they expected the UK GDP to have fallen less than previously expected in Q1, and to recover to pre-pandemic levels over the course of this year.

On the inflation front, they said that it may rise above 2% towards the end of the year, but this is likely to be due to transitory effects and thus, the rise may prove to be temporary. Given that, they added that they do not intend to tighten monetary policy until there is evidence of achieving the inflation goal sustainably.

BoE interest rates
BoE interest rates

The pound gained initially on the decision to slow down QE purchases, but pulled back soon thereafter to give back almost all the decision-related gains. This may have been due to the fact that the QE slowdown was already expected, or due to the Bank’s note that this was not a major change. It could also be that GBP-traders remained cautious due to the uncertainty surrounding the Scottish election that could trigger a showdown with the UK government over its independence movement.

GBP/USD Technical Outlook

GBP/USD is currently trading between two of its short-term tentative lines, a downside one taken from the high of Apr. 20 and an upside one drawn from the low of Apr. 12. Following the recent rebound from that upside line, the pair is now trading close to the downside line. As long as the rate remains between the two lines, we will stay neutral. In order to consider the next short-term directional move, a break through one of the lines would be needed.

If the aforementioned downside line breaks and the rate pops above the 1.3940 barrier, marked by yesterday’s high, that may attract more buyers into the game. GBP/USD could travel to the 1.3976 obstacle, or to the 1.4009 zone, marked by the highest point of April. Initially, the pair might get halted there, however if the bulls are still feeling comfortable, they may overcome that barrier and aim for the 1.4054 level, marked by the inside swing low of Feb. 23.

On the other hand, if the rate breaks the previously mentioned upside line and falls below the 1.3835 territory, marked by an intraday swing high of May 3, that could spook the bulls from the field temporarily. GBP/USD might then drift to the current lowest point of May, at 1.3800, a break of which would confirm a forthcoming lower low, potentially opening the door towards the next possible support area, at 1.3750. That area marks the inside swing low of Apr. 14.

GBP/USD 4-hour chart technical analysis
GBP/USD 4-hour chart technical analysis

As For The Rest Of Today's Events

Besides the US employment report, we also get jobs data for April from Canada as well. The unemployment rate is expected to have risen to 7.8% from 7.5%, while the net change in employment is forecast to show that the economy has lost 187.5k jobs after gaining 303.1k in March. A soft employment report could raise questions over whether the BoC acted correctly and scaled back its bond purchases at the prior gathering and may force the Loonie to correct lower.

We also have two speakers on today’s agenda and those are ECB President Christine Lagarde and BoE MPC member Ben Broadbent.

Investors Lock Their Gaze On The U.S. Nonfarm Payrolls

Related Articles

Jeffrey Halley
North Asia Catches A Friday Flu By Jeffrey Halley - Jul 30, 2021

North Asian equity heavyweights have deviated from the price action on Wall Street overnight, heading directly South this morning. Mainland China, Hong Kong, Japan and South Korean...

Investors Lock Their Gaze On The U.S. Nonfarm Payrolls

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: The content we produce does not constitute investment advice or investment recommendation (should not be considered as such) and does not in any way constitute an invitation to acquire any financial instrument or product. The Group of Companies of JFD, its affiliates, agents, directors, officers or employees are not liable for any damages that may be caused by individual comments or statements by JFD analysts and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his investment decisions. Accordingly, you should seek, if you consider appropriate, relevant independent professional advice on the investment considered. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with the legal requirements for financial analyses and must therefore be viewed by the reader as marketing information. JFD prohibits the duplication or publication without explicit approval. 75.05% of the retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. Please read the full Risk Disclosure - .
Continue with Google
Sign up with Email