The NFP came in much better than expected with 209K versus an expected 183K as well as an upwards revision of last months’ NFP which was already strong to 231K. The unemployment rate dropped to 4.3% again even as the participation rate increased to 62.9%. What was also positive is that wages went up 0.3% as was expected which could help inflation levels to pick up, especially since we are seeing that the labor market is at or nearing full employment. This keeps the FED on track to start reducing the balance sheet in September while a rate hike in December certainly remains a possibility. as such we saw a large correction in the USD, particularly in light after having taken such a beating recently.
Today we will have FED officials speaking which could move the USD as later this week will see important inflation data out of the US, the rate decision by the RBNZ as well as the montly OPEC and IEA reports.
Currencies
EUR/USD – dropped sharply after the NFP strengthened the USD and we are finding some support on the upwards trendline. I mentioned last week that the indicators were heavily in the overbought territory and that has now changed, even though the RSI managed to reach the highest level in 2 years. We can see though, that the 75+ RSI level is a level at which we usually see a (sharp) correction.
USD/JPY – after having tested the support just below the 110 level, the NFP caused a move upwards, all the way to the resistance just below the 111 level. The Security Council adopted new sanctions against North Korea over its missile tests and China has reportedly asked North Korea to cease these tests as we await the North Korean response, which obviously could increase tensions further and cause the JPY to strengthen again.
GBP/USD – the GBP had 2 tough last days of the week, as it shed around 225 pips due to the BOE and the NFP and just barely was able to remain above the 1.30 level. The GBP dropped already on Thursday as the prospects for a rate hike in the near future faded and on Friday it dropped due to USD strength on the backdrop of the strong NFP. Over the weekend there were reports that the Brexit negotiations are not going well and that the UK would be prepared to pay €40 billion to settle some differences, which was also quickly denied.
USD/CAD – even though the Canadian data was overall positive, the CAD was not able to withstand the resurgence of the USD on Friday after the NFP even if also the price of oil went up. As such, after 5 weeks of consecutive losses, the USD was able to mark the first week of gains.
Bitcoin – reached a new record high and is trading well above the 3000 level currently even over 3200 as we see that the fork didn’t have any negative consequences for Bitcoin, quite the opposite actually. Since the start of the month and since the split, Bitcoin has moved up another $600.
Indices
Dollar Index – managed to prevent reaching January 2015’s lows as the NFP was much better than expected and as such the USD strengthened and was able to mark the first weekly gain in a month, although it is still trading in the downwards trendline.
S&P 500 – is trading close to its record high as it moved up on Friday as most sectors were green, led by the financial sector and the technology sector also help lift the S&P. at the moment it would appear that the market is unfazed by the approaching unwinding of the balance sheet by the FED and also more warnings that the stock market is overvalued.
Commodities
Gold – the resistance around the 1270 level remained intact despite numerous attempts to break through it and the NFP took out any further attempts as gold dropped nearly $15 in the aftermath of the NFP. Due to the drop, gold marked its first weekly drop after 3 weeks of gains.
Oil – moved higher on Friday and is trading near the resistance around the 49.40 level. The strong NFP signals that the US economy is still doing well, which should keep demand for oil at solid levels and as such we saw oil move up. in addition, the number of active rigs decreased by 1 and it appears as if the rig count is stalling after increasing week by week for months. However, increased production by OPEC is what is keeping a cap on its gains so far as we will see if anything interesting will come out of the OPEC and IEA reports due this week and of course the inventory data.
Stocks
Snapchat – is moving up slowly after reaching an all-time low on Thursday as it will report its earnings on Thursday in what could be a make or break earning report.
Tesla (NASDAQ:TSLA) – continued to move up after its earnings and could be well on its way to it record high reached in June, although a lot will depend on continued progress of production and deliveries, which are crucial.
Teva – dropped by another 13% and now has lost already one third of its value in 2 days of trading. It looks like a falling knife at the moment, something that could be very painful when trying to catch, although with such sharp drops, it is also very tempting to buy in the hope for a correction.
