Intraday Market Thoughts

Jobs Jump Fades

Jul 3, 2020 11:19 | by Adam Button

Risk trades initially cheered an unexpectedly strong non-farm payrolls report but the enthusiasm didn't last (More on the dynamics of market reaction and yesterday's key 6 charts  below).  Strong US data and recovering China PMIs helped affirm the paragdigm of stabilizing growth = USD weakness, which was anticipated in yesterday's NFP preview here.  XAG, AUD, NZD are leading against the USD, while GBP and CHF lag. The US is on holiday, giving markets a chance to regroup. Monday's long DOW30 trade in the Premium Insights' hit its 26200 target yesterday for a 670-pt gain, while last week's Premium long in DAX at 12130 has yet to reach its final target of 12770, but Ashraf may close it before today's close.

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Jobs Jump Fades - Performance Jul 3 2020 (Chart 1)

Strong US jobs & caveats

US June non-farm payrolls roundly beat expectations with 4.8m new jobs added compared to the 3.2m consensus. In addition, the prior two reports were revised modestly higher. Perhaps most impressive was the unemployment rate at 11.1% compared to 12.5% expected. The caveat that market participants had been watching surrounding that metric was in those absent from work for 'other reasons'. It had swelled recently and would have meant an additional 3 percentage point increase in May. The BLS highlighted that many of those probably belonged in the unemployed category were estimated at up to 3%. This month, they estimated that only 1 pp of them were likely miscategorized.

Perhaps more interesting was how the market responded to the data. Initially it was strongly positive for risk assets but that faded, particularly late in the day. The tug-of-war between the virus and reopening continues and it was data from a growing number of problem states that weighed. In particular, 10,109 cases in Florida was a new record an exceed all the daily cases in the EU. The charts below were posted on Ashraf's WhatsApp Broadcast Group right after the release of US jobs report, highlighting intermarket backing of tapering risk appetite.

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Jobs Jump Fades - Charts Jul 2 2020 (Chart 2)

With the US headed out for a holiday on Friday, the market is likely to quiet but case numbers Friday and on the weekend will set the tone for next week.

Looking Through Jobs Data Confusion

Jul 2, 2020 13:05 | by Ashraf Laidi

All eyes turn to today's release of the US June employment report (Friday is an early US close due to US Independence Day), which will raise more questions than answers due to the fast-changing dynamics of data collection, workers classification and revisions (more on why many see an upside surprise below). Global indices extend their ascent with the DAX breaking short-term trendline above 12480s and DOW30 attempting to regain its 200-DMA. Since the start of the Asian session, Kiwi and sterling are the top gainers, while loonie and silver are the only losers against USD. The final target in our Premium long XAUUSD from April 20 remains at 1790 as we have not yet seen the exact print from most platforms (but most of you must have locked in some gains on the way from 1690 entry)

تحديث صفقات اليورو و الداو و الداكس

(فيديو المشتركين قبل بيان الوظائف الأمريكية)

June NFP is expected to show a rise of 3.06 mln, but several prominent economists anticipate a jump to a new record of 4.0 mln, following May's 2.5 mln. The unemployment rate is expected to dip to 12.5% from 13.3%.  Yesterday's ADP survey release of June private sector showed a rise of 2.37 mln, undershooting forecasts of 2.9 mln gain, following a jump in May revision to 3.07 mln from the initial 2.76 mln.

Date collection is among the issues at hand in today's reports as the collection rate is seen around 69%, well below the normal rate of 85% before the Covid19 pandemic. This opens the possibility for considerable revisions (upward and downwards), especially as several US states slowdown their re-opening.

Classification of workers is another major issue. The last 2 reports were said to be inflated by classifying employed people absent from work as unemployed or as a temporarily laid off.

As for the likely USD reaction, a higher than expected NFP may trigger a short-term bounce in the currency, before a gradual decline later on -- as was seen in the aftermath of yesterday's upside surprise in services ISM. The rationale behind USD declines following strong US data would be explained by the notion that stabilizing growth would mean less need for USD demand non-US corp and bank issuers in light of improved capital market conditions. 

Gold stabilizes around 1767 after an earlier decline following the release of the FOMC minutes showing officials not a in a hurry to commit to yield-curve control.

As always, we watch oil's 37 support as one of our 4-point check list to assess risk-appetite and positioning in the major indices. Our Premium longs in DAX30 and DOW30 deepen in the green. 


Virus Drug Optimism Kicks off Quarter

Jul 1, 2020 14:22 | by Adam Button

Gobal indices jumped ahead of the US open on positive findings about an experimental coronavirus vaccine from Pfizer and BioNtech, which produced a high level of antibodies. Tuesday's news of stronger US consumer confidence data and stable US virus cases were sufficient to boost risk trades to a strong finish for the quarter. ADP jobs data also came in stronger than expected. The ISM manufacturing survey is due up next. The chart below shows positive US economic data surprises are away ahead of the rest, raising the question about sustainability. Each of the last two Premium trades is up +250 pts and open.

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Virus Drug Optimism Kicks off Quarter - Citi Surprise Index (Chart 1)

US consumer confidence continued to rebound in the June report at 98.1 compared to 91.4 expected. That continues a series of strong beats in US economic data. Particularly encouraging was a jump in the 'expectations' component to 106.0 from 96.9 a month earlier.

The data helped to launch risk trades higher, including a 1.5% rise in the S&P 500 and large gains in the commodity currencies. More broadly, the US dollar was under significant pressure, likely due to quarter-end flows.

In terms of COVID-19, cases in US hotspots remained at high levels but there was some leveling off in Florida. We warn that's likely due to weekly trends and is likely to reverse in the day ahead. In Texas, Arizona and several smaller states, cases hit record highs.

On the quarter, the Australian dollar was the best performer by a significant margin with NZD in second place. Clustered at the bottom were the yen, pound and US dollar.

Year-to-date performance, however, offers a clearer picture of impact of the virus with the Swiss franc on top and the pound lagging. Within all that, there have been dozens of major swings.

In equity markets, the moves were massive. For US stocks, it was the best quarter since 1998 and the the first time a +20% quarter marked a -20% quarter since 1932. Within US stocks, the divergence was stark with the DJIA up 17.8% and the Nasdaq up 30.6%. Elsewhere, the FTSE 100 rose a relatively modest 8.8% while the DAX climbed 23.9%.

The day ahead features more economic data and we remind readers that non-farm payrolls will be on Thursday rather than the usual Friday slot accounting for the US holiday. The market is likely to focus on the ISM manufacturing report for June. A series of regional numbers have beaten the consensus, some by a larger margin so risks to the 49.9 consensus are undoubtedly on the upside.

الداكس ضد باقي المؤشرات

Jun 30, 2020 19:44 | by Ashraf Laidi

يناقش معكم خبير الأسواق العالمية أشرف العايدي في هذا الفيديو عن كيفية المقارنة بين مؤشر الداكس وباقي المؤشرات الرئيسية للاستفادة منها في تحليل الشارت بشكل صحيح. الفيديو الكامل

Special Effects, Gold Retests 1785

Jun 30, 2020 16:58 | by Adam Button

Quarter-end directionless trading ensues in indices as the Monday Effect in Covid19-count combined with month/quarter-end effect spills on to what will be a busy and messy session. More on the Virus-Count Monday Effect below. USD is knocked over by all currencies as XAUUSD retests the 1785 high. A new Premium trade was posted yesterday at the close of the US cash session. Ashraf posted the Premium subscribers' video with a focus on rare price and time analogs in EURUSD.

The breakout of a triangle in EUR/GBP on Monday (exploited by our Premium Insights' trades) and the S&P500's bounce from 3000 were tradable moves, but entirely technical. On the fundamental side, market pricing was less compelling.

The US dollar is rebounding across the board, attempting to breakout of the 97.70/80 barrier. US Crude oil deserves a close look as its $37 support remains in tandem with general foundation in the major indices. Yesterday, US pending home sales jumped 44.3% in another positive economic surprise, compared to +19.3% expected. There was some follow through in the market on the headlines but it's a second-tier housing indicator.

Virus-Count Monday Effects

In terms of the virus, cases in the hotspots were lower but that was surely due to the Monday effect, something we've warned about before. There is systematic undercounting and testing in many states/countries coming out of the weekend. The effect often extends through Tuesday before payback begins on Wednesday. By this point, markets should have factored that in but there were noticeable moves after the Florida numbers in particular.

There were also noticeable divergences. The S&P 500 rallied 1.5% but Treasury yields were lower and the US 5-year hit a record low of 0.27%.

It's quarter end and it's always easy to point the finger at that for hard-to-explain moves. The lesson at the moment is to watch the technicals but the keep the fundamentals in mind for the turn of the calendar.

On that front, it will be a busy few days in the US starting Tuesday with consumer confidence from The Conference Board at 1400 GMT. It's one of the best forward-looking indicators and the consensus is an improvement to 90.5 from 86.6.