MARKET BRIEFING – LONDON OPEN 11.01.2016
Last Friday, the Bureau of Labor Statistics published its first Jobs report of 2016. Although the data looks back to December, this jobs report was meant to set the tone for a year where the Federal Reserve according to its dot plot is planning no less than 4 interest rate increases.
The unemployment rate remained stable at 5.0% however the Non-Farm Employment Change number caught the initial headlines with 292,000 jobs being added during the previous month. This very strong number blew away the forecast of 203,000 and the prior release of 252,000. The revisions for the prior two months were also good at +50,000.
One would have expected that on the face of it, such positive Non-Farm Payroll data would have sent the US Dollar higher during the latter part of the New York session as traders priced in an increased probability of an interest rate hike at the Federal Reserve March meeting.
However, the one piece of bad news that was contained on Friday’s Job Report, the month on month Average Hourly Earnings number disappointed investors.
As the US Dollar lost ground as it traded into the close the markets felt that although the NFP headline looks impressive, the markets still view the numbers not good enough for a March increase.
The question mark over the quality of the jobs being created is still of a great concern and with the jobs outlook approaching levels of full employment, it is debatable that we see further large NFP numbers announced during the coming year.
The Federal Reserve continues to push a 4 interest rate increase scenario for 2016, however, the bond market sees this to be too optimistic.
What is rather striking is according to Bloomberg’s World Interest Rate Probability (WIPR) page, market participants have now calculated an 8% probability the interest rates will be cut in March.
Although this is an unlikely scenario that the market is now allowing for a potential rate cut does show how fragile many market participants view this recovery in the US economy.
The big story of last week was China. This morning we awoke to headlines that there have been further reverses on the Shanghai and Shenzhen stock exchanges.
The pessimism that has seeped into the global economy since the start of the year combined with the far from unified position amongst committee members that was highlighted in last week’s Federal Reserve minutes would seem to point to further rate hikes being extremely gradual.
EURUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.1003
Target 2: 1.0872
Projected range in ATR’s: 0.0096
Daily control level: 1.0800
GBPUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.4588
Target 2: 1.4462
Projected range in ATR’s: 0.0095
Daily control level: 1.4650
USDJPY
The intraday technical outlook
Trend 1 hour: Down
Target 1: 117.61
Target 2: 116.50
Projected range in ATR’s: 0.81
Daily control level: 118.80
USDCHF
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.9975
Target 2: 0.9856
Projected range in ATR’s: 0.0095
Daily control level: 1.0050
USDCAD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.4260
Target 2: 1.4079
Projected range in ATR’s: 0.0100
Daily control level: 1.4050
AUDUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.7001
Target 2: 0.6906
Projected range in ATR’s: 0.0074
Daily control level: 0.7080
GOLD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1116.00
Target 2: 1094.79
Projected range in ATR’s: 12.54
Daily control level: 1091.00
OIL
The intraday technical outlook
Trend 1 hour: Down
Target 1: 34.71
Target 2: 32.20
Projected range in ATR’s: 1.40
Daily control level: 35.30
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