Ipek Ozkardeskaya
Swissquote Bank Ltd
The market reaction to the US nonfarm payrolls may well be hyperbolic as traders’ nerves have been quite tense since the beginning of the year.
The US economy is expected to have secured a solid 200’000 nonfarm jobs in December. But of course it is not only about the quantity yet also about the quality. Besides the number of jobs added, the improvement in wages and the participation rate will also be closely monitored. The wages are expected to have improved by 2.8%y/y in 2016, the unemployment rate is seen stable at 5% although the participation rate deteriorated significantly during the year due to structural and demographic changes. Should the numbers please, the first labour data could well give some comfort to Fed hawks and lend some support to the US dollar. If not, the sentiment in the US will certainly turn sour. In the worst case scenario, the market could start questioning whether the Fed’s 25 basis points hike was premature and how realistic is the 1% hike through 2016.
The dollar index failed to take over the 100-handle since December. The US sovereign yields resist on the dovish Fed risks as the WTI hit a 12-year low and the US stocks extend losses along with the global equity complex.
The market gives less than 50% chance for a second rate hike before June.
To avoid direct volatility, traders may consider taking their positions on the cross pairs. In this context,
- EURJPY could offer an interesting downside trend below 128.60, major 38.2% on the weekly slide.
- GBPJPY is deeply oversold (RSI 17%) and surpassing 175.00, minor 23.6%) on November-December sell-off), further correction to 177.65 could well be considered.
- EURGBP rebounded lower from 0.7470, a stone’s throw lower than October pick of 0.7493. Macro funds could well jump in to sell the rally at 0.75+ to trade the divergence between the BoE and the ECB.
The US economy is expected to have secured a solid 200’000 nonfarm jobs in December. But of course it is not only about the quantity yet also about the quality. Besides the number of jobs added, the improvement in wages and the participation rate will also be closely monitored. The wages are expected to have improved by 2.8%y/y in 2016, the unemployment rate is seen stable at 5% although the participation rate deteriorated significantly during the year due to structural and demographic changes. Should the numbers please, the first labour data could well give some comfort to Fed hawks and lend some support to the US dollar. If not, the sentiment in the US will certainly turn sour. In the worst case scenario, the market could start questioning whether the Fed’s 25 basis points hike was premature and how realistic is the 1% hike through 2016.
The dollar index failed to take over the 100-handle since December. The US sovereign yields resist on the dovish Fed risks as the WTI hit a 12-year low and the US stocks extend losses along with the global equity complex.
The market gives less than 50% chance for a second rate hike before June.
To avoid direct volatility, traders may consider taking their positions on the cross pairs. In this context,
- EURJPY could offer an interesting downside trend below 128.60, major 38.2% on the weekly slide.
- GBPJPY is deeply oversold (RSI 17%) and surpassing 175.00, minor 23.6%) on November-December sell-off), further correction to 177.65 could well be considered.
- EURGBP rebounded lower from 0.7470, a stone’s throw lower than October pick of 0.7493. Macro funds could well jump in to sell the rally at 0.75+ to trade the divergence between the BoE and the ECB.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
Recommended Content
Editors’ Picks
EUR/USD retreats below 1.0700 after US GDP data
EUR/USD came under modest bearish pressure and retreated below 1.0700. Although the US data showed that the economy grew at a softer pace than expected in Q1, strong inflation-related details provided a boost to the USD.
GBP/USD declines below 1.2500 as USD rebounds
GBP/USD declined below 1.2500 and erased the majority of its daily gains with the immediate reaction to the US GDP report. The US economy expanded at a softer pace than expected in Q1 but the price deflator jumped to 3.4% from 1.8%.
Gold drops below $2,320 as US yields shoot higher
Gold lost its traction and turned negative on the day below $2,320 in the American session on Thursday. The benchmark 10-year US Treasury bond yield is up more than 1% on the day above 4.7% after US GDP report, weighing on XAU/USD.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.