NetoTrade - Analytics

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    Sideways Trend Prevails Ahead of NFP

    Financial Markets Awaiting Key Unemployment Figures to Determine Outlook for Policy

    Major US equity benchmarks continued to recover from September losses as end of month window dressing volatility abated with traders eying the fourth quarter as the time for a potential policy shift.  Both Nasdaq and S&P 500 futures closed the session higher, gaining 0.20% and 0.15% while the Dow Jones trended marginally lower. Stocks did retreat from highs as resurgent concerns about the state of the global economy combined with stronger US data buffeted expectations of a rate hike before the end of 2015.  A strong payroll number later in the session could dent recent equity momentum further, especially after major technical setups in the benchmarks showed a bearish bias on the longer-term basis while shorter-term patterns are showing emerging reversal potential to the upside.  If key support in S&P futures at 1873 gives way once more, it could spell another sharper pullback in the index.

     

    Although modestly lower versus the prior month, the latest manufacturing PMI from the United Kingdom managed to beat expectations, with the PMI printing at 51.5.  In another positive sign, the prior month’s number was revised slightly higher to 51.6, but continues to highlight the pressure on global manufacturing with key figures across the globe showing a similar trend back towards the contractionary threshold at 50.  The UK construction PMI is due later in the session, forecast to stay flat at 57.3 but is nevertheless a strong showing, likely to bolster the outlook for the Bank of England’s projected interest rate hikes in early 2016.  Although GBPUSD has been trading notably weaker lately, yesterday’s session marked the first upside in over a week as stronger data boosted the appeal of the Pound.  However, should US employment data strengthen further, it could see the GBPUSD retreat further. 

    Overnight data from Australia showed that the high level of monetary accommodation from the Central Bank is being felt in the real economy based on the latest uptick in spending data.  According to the figures, retail sales increased by 0.40% in the latest reporting period versus the -0.10% contraction in the prior period.  Although the Reserve Bank of Australia is projected to remain highly dovish in its stance towards monetary policy for the foreseeable future considering the downturn in key trading partner China, the latest news is a growing sign of confidence that the Central Bank will do what it must to preserve growth in the nation.  Commodity prices are forecast to remain lower for the medium-term, hurting the outlook for GDP, but the Australian dollar continues to claw back from losses over the past few months, with the latest data adding to the tailwinds for the AUDUSD pair. 

     

    Economic Calendar

     

    Natural Gas Equidistant Channel Trading Opportunity

     

    Commodities are once again feeling the pinch of the global economy as growth concerns resurface with energy demand forecast to remain anemic amid one of the largest production gluts on record.  Although drill rigs continue to fall, production and storage levels remain high, adding to the downside pressure on prices especially as seasonal demand is set to fall before the winter months see a rebound for heating needs.  The current downward trending equidistant channel formation emerging in natural gas prices has a strongly bearish bias with ideal short positions initiated at the upper channel line targeting the lower channel line for an exit.  Should prices move above the upper channel line, it could indicate a channel-based breakout to the upside and potential reversal higher to be accompanied by renewed momentum and volume.

     

     

    Resistance: 2.431/2.436

    Support: 2.422/2.418


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