EUR/USD: Buy At 1.1150
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Nonfarm payrolls rose by 151k jobs last month after an upwardly revised 275k increase in July, with hiring in manufacturing and construction sectors declining. The unemployment rate was unchanged at 4.9% as more people flocked to the labor market. The market had forecast payrolls increasing 180k last month and the unemployment rate slipping one-tenth of a percentage point to 4.8%.
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The step-down in employment growth comes after the economy created a total of 546k jobs in June and July. The smaller-than-expected rise in payrolls likely reflects difficulties adjusting the data for seasonal fluctuations related to school calendars. Over the last several years, the government's initial August payrolls estimates have been weak only to be subsequently revised higher.
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The report came on the heels of news on Thursday that the manufacturing sector contracted in August for the first time in six months, which had already cast a shadow on a rate hike at the Fed's September 20-21 policy meeting. Financial markets on Friday were pricing in a roughly 21% chance of a rate hike this month and a 54% probability in December. In our opinion the Fed will raise rates in December.
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Richmond Fed President Jeffrey Lacker said signs of US economic strength suggest the Federal Reserve's delay of further interest rate hikes is increasing the risks of it falling behind the curve on its objectives.
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A second report from the Commerce Department on Friday showed the trade deficit fell 11.6% to USD 39.5 billion in July as soybean sales buoyed exports to a 10-month high, in another boost to the growth outlook for the third quarter. The Atlanta Fed is forecasting gross domestic product rising at a 3.5% annual rate in the third quarter.
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The EUR/USD dropped on Friday despite disappointing US jobs numbers. On the other hand, macroeconomic data from the Eurozone are getting better. Eurostat said that retail sales, a proxy for household spending, rose 1.1% mom and 2.9% yoy in July, in both cases much more than market expectations. The boost in retail sales came in the month following the June 23 Brexit referendum, in a sign that consumers' morale was not immediately hit by the British vote to leave the EU.
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We expect Fed to stay on hold in September, no action form the ECB this week and gradual acceleration in Eurozone inflation in the coming months. This should support the EUR/USD in both near and medium term. Our buy order at 1.1085 has not been filled and we raised out bid to 1.1150.
GBP/USD Supported By Strong UK Data
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PMI for the services sector jumped to 52.9 in August from July's seven-year low of 47.4, the biggest one-month gain in the survey's 20-year history.The survey echoed the upbeat tone of data released last week on the manufacturing and construction sectors in August. Last week, PMIs for the much smaller manufacturing and construction sectors showed similar gains to the services PMI, boosting August's all-sector PMI to a five-month high of 53.2.
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Britain's new finance minister Philip Hammond will pay close attention to the figures as he considers how decisively he will break with his predecessor's austerity plans later this year. New Prime Minister Theresa May has not decided when to start formal exit talks with the EU.
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Sterling jumped to a 7-week high against the dollar on Monday. In our opinion there is no justification for further BoE easing after a recent series of very good macroeconomic data. We will be looking to buy the GBP/USD at 1.3200.
FOREX - MAJOR PAIRS:
FOREX - MAJOR CROSSES:
PRECIOUS METALS:
It is usually reasonable to divide your portfolio into two parts: the core investment part and the satellite speculative part. The core part is the one you would want to make profit with in the long term thanks to the long-term trend in price changes. Such an approach is a clear investment as you are bound to keep your position opened for a considerable amount of time in order to realize the profit. The speculative part is quite the contrary. You would open a speculative position with short-term gains in your mind and with the awareness that even though potentially more profitable than investments, speculation is also way more risky. In typical circumstances investments should account for 60-90% of your portfolio, the rest being speculative positions. This way, you may enjoy a possibly higher rate of return than in the case of putting all of your money into investment positions and at the same time you may not have to be afraid of severe losses in the short-term.
How to read these tables?
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Support/Resistance - three closest important support/resistance levels
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Position/Trading Idea:
BUY/SELL - It means we are looking to open LONG/SHORT position at the Entry Price. If the order is filled we will set the suggested Target and Stop-loss level.
LONG/SHORT - It means we have already taken this position at the Entry Price and expect the rate to go up/down to the Target level. -
Stop-Loss/Profit Locked In - Sometimes we move the stop-loss level above (in case of LONG) or below (in case of SHORT) the Entry price. This means that we have locked in profit on this position.
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Risk Factor - green "*" means high level of confidence (low level of uncertainty), grey "**" means medium level of confidence, red "***" means low level of confidence (high level of uncertainty)
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Position Size (forex) - position size suggested for a USD 10,000 trading account in mini lots. You can calculate your position size as follows: (your account size in USD/USD 10,000) * (our position size). You should always round the result down. For example, if the result was 2.671, your position size should be 2 mini lots. This would be a great tool for your risk management!
Position size (precious metals) - position size suggested for a USD 10,000 trading account in units. You can calculate your position size as follows: (your account size in USD/USD 10,000) * (our position size). -
Profit/Loss on recently closed position (forex) - is the amount of pips we have earned/lost on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.
Profit/Loss on recently closed position (precious metals) - is profit/loss we have earned/lost per unit on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.
Author
Growth Aces Research Team
Growth Aces
GrowthAces.com is an independent macroeconomic consultancy. They offer you daily forex analysis with forex signals for traders.
