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Mixed start ahead of jobs report

It's been a mixed start to trading on Friday, as we await the latest jobs report from the US.

US futures are marginally higher but we have lost a little momentum. That may simply be because we're awaiting the latest labour market data from the US, a report that is arguably the most closely followed each month. It also comes after a dreadful month of job creation in February when only 20,000 were added, although the data has been very inconsistent since the shutdown and another revision may come today.

Broadly speaking the labour market remains very strong and the economy, while slowing, is very healthy. With unemployment running at only 3.8% and wages rising at 3.4% annually, there's clearly nothing to worry about just yet. That said, the US is not immune from the global slowdown and investors will only accept weak job growth for so long. It will be interesting to see what happens today if we get another bad reading, especially if it isn't accompanied by a big revision to the February number. The market is not expecting this though, with around 180,000 forecast.

The greatest threat to the economic outlook remains the trade war between the US and China. While we have seen clear progress in recent months, the last part of the negotiation is expected to be the most difficult and drawn out. Trump remains optimistic about a deal but less confident about the timing.

May requests more time

I'm not sure what the public fear more, an potentially indefinite backstop or indefinite negotiations. Theresa May requested another short extension from the EU on Friday to get a Brexit agreement through Parliament, as she continued to engage in talks with the opposition Labour Party.

It seems there are differences though between what May deems to be an acceptable extension and what Tusk believes it to be, which is much longer, albeit flexible. This will likely be discussed at the emergency EU summit next Wednesday, with the default remaining that the UK leaves without a deal on 12th April, one week from today.

Gold remains weighed down by USD

The dollar may be trading a little softer today but another strong day on Thursday is keeping the pressure on gold which has been weighed down by it over the last couple of weeks. It remains above $1,280, a major support level, a break of which could be the catalyst for another significant decline, with $1,260 being notable support below.

The dollar is always vulnerable to the release of the US jobs report so today could bring volatility for gold also. Gold has also been weighed down by improved sentiment in the markets so a strong jobs report today could see $1,280 come under real pressure.

The common European currency has been trading in a junior ascending channel against the Japanese Yen since March 28. The currency pair re-tested the lower boundary of the channel pattern at 125.04 during yesterday's trading session.

Technical indicators flash strong sell signals on the daily time frame. Therefore, the currency exchange rate could edge lower during the following trading session.

However, the EUR/JPY pair could aim for the weekly R2 at 125.70 within this session.

If the resistance level holds, bearish traders are likely to push the exchange rate lower towards the 200-hour simple moving average at 124.70 today.

The Australian Dollar traded with low volatility against the US Dollar on Thursday. The currency pair appreciated about 0.41% in value during yesterday's trading session.

Today's trading session began with bullish sentiment, and by the middle of the trading session, the exchange rate has breached the upper boundary of a downtrend channel at 0.7126.

As for the near future, it is likely that the currency exchange rate continues its upside movement. The potential upside targets in the next 24 hours will be near the weekly R1 at 0.7143.

The US Dollar traded with low volatility against the Canadian Dollar on Thursday. However, a breakout occurred through the upper boundary of a descending channel pattern at the end of yesterday's session.

Given that a breakout had occurred, it is likely that the currency exchange rate edges higher within this session. The possible upside target will be near the weekly R1 at 1.3421.

Although, the US macroeconomic data releases scheduled at 12:30 GMT could play an influential role in the USD/CAD currency pair movement today.

During the last 24 hours, the New Zealand Dollar has depreciated about 0.93% in value against the US Dollar. The currency pair was pressured down by the 50– and 100-hour simple moving averages.

Today's session began with a bearish sentiment. By the middle of the European trading session, a breakout had occurred through the lower boundary of a dominant ascending channel at 0.6748.

Meanwhile, Friday's US Non-Farm Payroll data release scheduled at 12:30 GMT might add more pressure to the currency exchange rate.

The greenback strengthened yesterday against the Yen and marked a three week high, as trade optimism continues to fuel the pair. US President Trump stated yesterday that China and the US are getting very close to a trade deal that may be announced within four weeks. However the markets attention could be turning towards the release of the US employment report for March, today at 12:30(GMT). The Non-Farm Payrolls figure is expected to rise and reach 180k if compared to prior figure of 20k, while at the same time the unemployment rate and the average earnings growth rate are expected to remain unchanged at 3.8% and +3.4% yoy respectively. Please note that after last month’s corrections on the NFP figure, we maintain some reservations about the final outcome of the indicator. Analysts seem to focus on the how strong the earnings component will be as it could boost consumption and cause a rebound in US yields. We would like to mention that should the actual rates and figures meet their respective forecasts, it would show a tight labor market in the US. Also such results would be indicative of the US economy being able to create new jobs while at the same time provide some indications for inflationary pressures in the US economy. USD/JPY continued its rise yesterday and during today’s Asian session, clearly breaking the 111.40 (S1) resistance level (now turned to support). We could see the pair remaining sensitive to safe have flows, as well as the US employment report later today. Should the bulls maintain control over the pair’s direction we could see it breaking the 112.00 (R1) resistance line. Should on the other hand the bears take over, we could see the pair breaking the 111.40 (S1) support line and aim for the 110.90 (S2) support barrier.

Saudi Arabia threatens to switch USD oil trades.

In an exclusive article, Reuters stated that Saudi Arabia considers the possibility of switching the USD for other currencies in oil trades, should the US congress pass a bill considering OPEC members as in breach of antitrust laws. Reuter’s sources have stated that the option had been discussed internally by senior Saudi energy officials and some went a step further stating that the plan had also been discussed with OPEC members. The bill which is wider known as NOPEC in the US, seems to have little chance of passing, yet the intense reaction by Riyadh is the element causing worries about oil prices stability and the USD. For the time being the markets seem unaffected by the news, however the “USD nuclear option” considered by the Saudis could have wider implications as also Iran and Russia may follow suit. WTI maintains a rather sideways motion over the past few days, testing the 62.00 (S1) support line, however being unable to successfully break it. To switch our bullish outlook for black gold’s prices though, we would require the commodity to clearly break the upward trendline incepted since mid-February. Should the market favor WTI’s long positions, we could see the commodity’s prices aiming if not breaking the 63.80 (R1) resistance line. On the other hand should oil come under the selling interest of the market, we could see WTI prices breaking below the 62.00 (S1) support line, the 60.85 (S2) support level and aim for the prementioned upward trendline.

Other economic highlights, today and early tomorrow

In today’s European session, we get Germany’s industrial output growth rate for February and later on the UK Halifax House Prices for March. In the American session we get Canada’s employment data for March as well as the US Baker Hughes oil rig count. During Monday’s Asian session we get Japan’s current account balance for February. As for speakers, Atlanta Fed president Bostic and ECB president Draghi are to speak.

USD/JPY H4

Support: 111.40 (S1), 110.90 (S2), 110.30 (S3)
Resistance: 112.00 (R1), 112.50 (R2), 113.20 (R3)

WTI H4

Support: 62.00 (S1), 60.85 (S2), 59.00 (S3)
Resistance: 63.80 (R1), 65.30 (R2), 66.50 (R3)

The US dollar strengthened against a basket of major currencies amid optimistic news regarding US-China trade relations. Yesterday, US President Donald Trump announced that Washington and Beijing intended to complete negotiations and conclude a new trade deal in the next four weeks. Chinese President Xi Jinping is also pleased with the progress of the negotiations. The dollar index (#DX) closed in the positive zone (+0.27%).

Positive statistics from the United States supported the US currency. Thus, the number of initial jobless claims fell to 202K, while experts expected 216K. Today, investors have taken a wait-and-see attitude before the publication of the report on the US labor market for March. We recommend paying attention to the difference between the actual and forecasted values.

The situation concerning Brexit is still in the spotlight. Earlier, members of the House of Commons supported the bill, which obliges the government to seek the Brexit delay from the EU. Theresa May intends to persuade the opposition to support the Brexit agreement, which has been rejected three times already. Earlier it was reported that the leader of the opposition Labour Party, Jeremy Corbyn, and the British Prime Minister held constructive negotiations and agreed on a joint work program on the implementation of Brexit.

The "black gold" prices have moved away from annual highs. At the moment, futures for the WTI crude oil are consolidating near $62.00 per barrel.

Market Indicators

Yesterday, there was a variety of trends in the US stock market: #SPY (+0.27%), #DIA (+0.68%), #QQQ (-0.04%).

The 10-year US government bonds yield is at the level of 2.51-2.52%.

The news feed on 05.04.2019:

At 15:30 (GMT+3:00) reports on the labor market will be published in the United States and Canada.

USDCHF is trading bearish, down from 1.012 level where a higher degree wave B) found a top, and wave C) started to develop. We can see that price unfolded a five-wave drop down to 0.9894 level, from where a temporary, three-wave pullback showed up. This three-wave pullback is now trading at potential resistance and reversal zones at 1.00-1.003, where a new turn lower may follow. At the mentioned zone, former swing high of wave iv and Fibonacci ratios can also react as reversal zones for the pair.

USDCHF, 4h

Below we have a closer look at the correction on the USDCHF pair.

USDCHF, 1h

USDCHF is trading higher but look at the personality of recovery from March 21st, its slow, choppy and overlapping so I think it can be a corrective rise; maybe even an ending diagonal in wave c here which can give even more confidence for a potential reversal lower in the near-term. .

The EUR/USD has formed a bullish SHS pattern (inverted head and shoulders). Order blocks are keeping the pair from progressing further down.

Today’s NFP with all accompanying data will give us the cue for EUR/USD next direction. At this point, the price is supported by the both left and right shoulders of the bullish SHS pattern. 1.1205 is the important support. All above it is a retracement in downtrend. Sellers are waiting within the 1.1270-1.1285 so we might see a rejection once the price gets in the POC zone. Only a break of 1.1205 will provide a continuation towards 1.1180 and 1.1150. Watch for the NFP, Average Hourly Earnings and Unemployment data today.

Investor risk appetite towards stock markets is edging cautiously higher on further optimism that the US and China are nearing closer to agreeing a “very monumental” trade deal. With US President Donald Trump stating that negotiations are “rounding the turn” and Chinese Vice Premier Liu He hailing the “new consensus” achieved recently, confidence is reaching new levels that a trade deal will eventually be signed after many months of protracted negotiations.

It is becoming increasingly more concrete and clear that both sides want to secure a deal, given the positive rhetoric from the respective governments, hence optimism is advancing that the outcome of a signed trade deal is moving towards a matter of “when” and not “if”.This rhetoric is highly encouraging for investors and fueling their appetite for riskier assets, which means good news for global stocks, emerging markets and potentially Oil as a consequence ofimproved risk appetite.

Questions will linger in the background over how much further upside can be priced in, but the likelihood is that investors will be more inclined to buy into this encouraging news before potentially selling the facts later down the line.

We believe that once the US-China trade deal is eventually announced, that could release pent-up demand and trigger a knee-jerk jump in risk-on assets. However, whether such gains are sustained depends on how markets interpret the technicalities of the deal, and what it means for a slowing global economy. As the saying goes, the devil is in the details.

Could NFP inject Dollar bulls with fresh inspiration?

The main event risk for the United States will be the upcoming US non-farm payrolls report due today.

This week has already presented some mixed data surrounding US employment. The March ADP employment data saw the weakest hiring by US companies in 18 months, although ISM’s job numbers saw its biggest gain in over three years. US jobless claims in the final week of March fell to its lowest level since 1969.

This sets up for a particularly intriguing March NFP report. Should the March NFP perform inline with the recent trend, showing that February’s slump was a one-off, that could strengthen tailwinds for the Greenback with 97.50 acting as a level of interest. On the other hand, if the jobs report exposes further weakness, markets could be prompted to send the Dollar index back below the psychologically-important 97.0 level.