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Market Wrap
The US unemployment rate is unchanged at 3.6% but 0.1% higher than expectations. The US average earnings Year over Year came in at the analysts’ expectations of 5.2% which is down from the previous reading of 5.5%. The earnings coming on lower show that the likelihood of a wage rise spiral that exacerbates inflationary pressures may not be occurring and the CPI readings could really be showing peak inflation has occurred. The headline figures though are last month’s revision higher in the US non-farm payrolls which went up from 428k to 436k and Mays nominal figure at 390k beating expectations of 325k.
Yesterday’s ADP NFP number came in so low that it did spook the market into thinking today’s data could be worse. However, the chart above shows that these two high frequency employment data points can diverge before averaging out in the months to come. What the market will want to see now, is the ADP figure being revised higher.
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The S&P500 had poked above yesterday’s high in the Asia Pac session and spiked lower at the futures open following the NFP data. 4100 has held as support so looking left on the m30 chart I am looking at yesterday’s intraday daily swing low still had a lot of buyers waiting down there and if they hold price up, we should be bullish early next week. A break lower than yesterday’s low and I think we take a much deeper dive looking for potential buyers.
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The S&P500 may not be doing what I’d have liked following a bullish jobs data report, but the US dollar is reacting as I’d have liked. The US dollar is starting to make higher swing highs and swing lows having found support at the $102.
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The stronger US dollar is helping my short the EURUSD idea and looking around the internet a lot of traders are calling the current distribution pattern a Head & Shoulders chart pattern. If the pattern works out as a H&S should, the target to the downside would be the same as the distance from the peak of the head to the neckline that spans between the two shoulders. By my calculations that takes the price action down to the 1.0500 big figure almost to the tick. Either way, that would be good news for my trade idea.
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At the time of writing Gold is lower by -1.07% following the jobs report and the upswing in the greenback. The entire precious metals sector is lower with Palladium down by -3.30%. The significance of this is that we don’t want to see precious metals that are being used as safe havens and liquid assets selling off with equities. But we should be on the lookout for equities to bounce and safe haven assets like gold, bonds, yen and the Swiss franc to fall.
What we currently have is a real mix and no direction in the forex markets, though being long the US dollar looks the safest bet.
