NetoTrade - Analytics

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    Soft Jobs Data Sees Dollar Cascade Lower

    Nonfarm Payrolls Miss Estimates By a Wide Margin in a Blow to Forecast Interest Rate Liftoff

    The losses in the US dollar following the payroll figure on Friday caused gold prices to surge higher, rallying over $25 points or 2.20% before modestly pulling back from highs.  While not enough to erase losses from earlier in the week, the move highlights the resurgence of the strong inverse correlation between gold prices and the US dollar.  The price action has led to the emergence of an ascending triangle technical pattern exhibiting a strongly bullish bias.  A move above resistance at $1172 per troy ounce would indicate an upside triangle-based breakout which would be confirmed with additional momentum and volume upwards.  This could be the beginning of a longer-term rally towards 1300 especially if prices are able to climb above key resistance at 1221.

     

     

    The stunning miss in the payroll figures was just one catalyst for the revision lower in third quarter GDP expectations as manufacturing data also hurt the outlook.  The contraction in factory orders highlights the continued weakening of the American manufacturing sector especially considering the losses in manufacturing jobs corroborated by the unemployment data.  The stronger dollar combined with the weaker export economy have seen forecasts for third quarter GDP reduced to the range of 1.20-1.50% in light of deteriorating macroeconomic circumstances.  A weaker GDP reading ill also impact the "data dependent” Federal Reserve as it plans its next steps for monetary policy and prepares for a potential liftoff from near-zero interest rate policy.  The EURUSD currency pair is setting up in an emerging ascending triangle with a strongly bullish bias.  Any break above resistance at 1.1455 would be considered an upside breakout.

     

     

    Data due from the Euro Area early in today’s cash equity session is set to give a stronger impression of the services and aggregate PMI figures for the area.  The flash estimates from the prior week showed both the services and composite PMI figures on the upswing, validating continued economic expansion in the monetary union and helping the region towards quarterly growth expectations of 0.40%.  Consumer spending is likely to be bolstered by the confluence of rising incomes across the region along with reduced expenditures mainly due to weakness in energy prices and a region on the cusp of deflation.  The EURGBP currency pair saw losses into the close of Friday’s session, with indication of further weakness in the pipeline due to the emerging doji pattern which has a strongly bearish bias.

     

    Economic Calendar

     
     
     
     
    USDCAD Equidistant Channel Trading Opportunity
     
    Since hitting multi-year highs the other week, the USDCAD currency pair has been progressively sliding lower on what appears to be a technical pullback in the pair, helped in part by weaker economic data from the US economy.  While the Canadian economy in general has weakened demonstrably under the weight of broader commodity deflation, the latest US payroll data is signaling the potential for the Federal Reserve to postpone a rate hike even further under the present circumstances.  The downward trending equidistant channel formation emerging in the USDCAD pair has a bearish bias with ideal short positions initiated at the upper channel line targeting the lower channel line. A move above the upper channel line could be indicative of a channel-based breakout to the upside to be accompanied by renewed upside momentum.  Fighting the near-term downtrend is not suggested due to expanded risks and narrower reward conditions.
     
     
    Resistance: 1.3174/1.3237
    Support: 1.3085/1.3031

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