FTSE -27 points at 7411

The US dollar made a soft start in Asia, after Friday’s nonfarm payrolls (NFP) surprised on the downside. The US economy added 156K’000 new nonfarm jobs in August versus 180’000 expected by analysts. Last month’s figure has been revised down to 189’000 from 209’000. The unemployment rate increased to 4.4% from 4.3% and the average earnings improved less-than-expected. The US stocks gained on Friday, as soft labour data revived dovish Federal Reserve (Fed) speculations. The US futures edged lower in Asia. The Dow Jones mini September futures retreated by 52 points, S&P500 mini and NASDAQ 100 mini September futures erased 8.50 and 26.75 points respectively. The US and Canada will be closed on Monday due to Labour Day bank holiday.

Gold extended gains to $1’328 on soft NFP read and gap opened above $1’330 as North Korea successfully tested a hydrogen bomb that could be loaded onto an ICBM, increasing its nuclear threat on the US. The combination of risk-off and the broad-based USD depreciation pushed the price of an ounce to November 9 high (US election), $1'336. However, the 30-day relative strength index (75.9) indicates that the yellow metal stepped into the overbought market. A downside correction is possible and immediate offers are seen pre-$1’340/$1’345. Short-term support could be found at $1315/1317 (area including 50-100-hour moving average) and $1’307 (minor 23.6% retrace on July – September rally).

The USDJPY advanced to 109.93 in Tokyo, as the Japanese monetary base expanded at a faster speed in August. The North Korean nuclear threat dented the appetite pre-110.00 mark. Nikkei (-0.93%) and Topix (-0.98%) fell due risk-off trades. Korean defense stocks rallied.

The Aussie was the only loser against the greenback. The AUDUSD fell to 0.7935 as the company profits fell by 4.5% in the second quarter, from +6.0% a quarter earlier. North Korea’s bomb test further weighed on the risk sentiment. The 0.80 resistance is expected to remain tight before the Reserve Bank of Australia’s (RBA) policy verdict due tomorrow. The RBA is expected to maintain the cash rate unchanged at 1.50% and the accompanying statement will likely remain cautious despite the recent rise in commodity prices. High household debt and strong AUD are risks to the economic recovery.

The EURUSD opened flat-to-positive due to USD depreciation. There is a rising anxiety among buyers before the European Central Bank’s (ECB) Thursday meeting. The strong euro could result in a more cautious and more-dovish-than priced ECB verdict. The ECB is now expected to wait until October to announce the future of its asset purchases program. According to Bloomberg news, officials may not have a complete plan until December. Hence, the downside euro risks escalate. Put options could be exercised at 1.1850 at today’s expiry, call options should give support at 1.1800. Top sellers are presumed between 1.1900/1.1950.

The DAX and the CAC took a breather as the euro softened last week. The deterioration in the global risk appetite hints at a softer weekly open in Frankfurt and in Paris.

Cable is rangebound between its 50-100-day moving averages (1.2980 – 1.2918). Brexit uncertainties keep the pound market under pressure. Brexit Secretary David Davis denied news that the UK will pay 50 billion pounds to leave the EU. A negative breakout could extend to 1.2890 (minor 23.6% retrace) and 1.2851 (Aug 30 low). A positive attempt could exhaust before 1.3020 (Fib 50% on August decline).

The FTSE 100 is called softer at the London open as well. Energy stocks could pare losses on prospects of recovery in oil markets.

The WTI crude traded above the 100-day moving average ($47.50) and the upside correction could extend to $48.00 (Fibonacci 50% on August decline) and $48.55 (major 61.8% retrace) as the US refineries resume their operations after Hurricane Harvey.