Neutral Stance Expected from Draghi Regarding Policies
Sentiment is mixed as the markets turn towards the upcoming statements from ECB President Mario Draghi to glean information that may shift economic momentum. Draghi may be unwilling to provide a firm stance today, as is it likely that waiting for news from the Federal Reserve will prove a better plan.
Equities have been free from news regarding the Chinese stock market, as the markets in China were closed for a holiday until Monday of this week. The break and preceding easing measures implemented in China saw the Dow Jones grow 294 points to close the day with an overall gain of 1.83%. As the actual economy has not seen much overtly positive news outside of the equity markets, it remains to be seen if US indices will be able to sustain gains of this magnitude for long. Tomorrow’s nonfarm payrolls data will be a big determinant of the direction that US equities will take based on the outlook for monetary policy.
Meanwhile, the important ADP private payroll figure released yesterday did not manage to move the market or the dollar much. For July, the initial report recorded new payroll creation at 185,000 jobs added which was revised downward to 177,000. Actual figures from August reported job growth of 190,000 that did not manage to reach expectations of 201,000. Due to the continual missing of goals, the expectations for ADP payrolls will most likely be adjusted lower going forward. Amid the ramping up present in several sectors, an optimistic market is saving reactions for nonfarm payrolls tomorrow. The dollar has maintained gains versus the Yen, recovering from the two days of losses earlier in the week. USDJPY currently sits around 120.15, testing the important resistance level at 120.77.
Stagnant growth in the Eurozone will be addressed today by Mario Draghi, the President of the European Central Bank. The topics for discussion in today’s meeting are sideways GDP, stubborn inflation and slow economic growth on the back of bond purchases. Inflation has stayed at 0.20% since earlier this year and GDP growth has seen similarly lackadaisical results between 0.30% and 0.40% between measurements. While the Euro has been performing well, this meeting carries the potential for it to be talked down while the overall tone remains neutral in lieu of the NFP report from America tomorrow.
Brent Crude Oil Head and Shoulders Trading Opportunity
After last week’s epic short squeeze, oil prices have retreated demonstrably as OPEC continues to exceed output quotas and Iran threatens to increased output by up to a million barrels with the lifting of sanctions likely around the corner. With supply still outpacing demand by a wide margin, the bias in oil prices remains to the downside. The emerging head and shoulders bearish pattern forming in the current Brent contract has a downside bias with ideal short positions initiated at the right shoulder neckline testing support at $48.35 with a move below considered a breakout. However, a move above the neckline at $50.99 will mean a breakdown in the pattern.