Inter Market Analysis – 7th August

12:30       USD                     Average Hourly Earnings (MoM) (Jul)                    0.2%      0.0%

12:30       USD                     Nonfarm Payrolls (Jul)                                                  223K      223K

12:30       USD                    Participation Rate (Jul)                                                                 62.6%

12:30       USD                     Private Nonfarm Payrolls (Jul)                                   215K      223K

12:30       USD                     Unemployment Rate (Jul)                                           5.3%      5.3%

Risk On

  • With Dollar rate hike imminent = Weaker Euro = Stronger EZ equities = Higher Bunds
  • BOE Broadbent said no urgency to rate hike – only one dissenter from the last BOE meeting
  • US unemployment claims lower than forecast but higher than previous
  • Asian shares higher although still struggling to end the week

Risk Off

  • France manufacturing data came in lower than expected -0.7%
  • German Industrial production -1.4%  = summer doldrums or potentially China effect
  • Truck bomb in Kabul
  • UK trade deficit widens in June
  • Japan’s economy probably shrank in second quarter on weak exports and private spending
  • Bloomberg article – hedge fund losses from commodity slump
Today is all about the NFP numbers and the dollar index.

US equities seasonality at play but OPEX could change for the better. European equities are faring better with QE induced programme – prospect of weaker EURO if US rate hike – but with China suffering – how do we justify a better equity numbers in the coming days or weeks?

Multi Time Frame Analysis

USD index

Daily

4 hour

The 4 hour dollar chart shows that price action continues to trade within a megaphone pattern and we are not ruling out a retest lower. NFP data will determine either we have a clean break out or else many dollar bulls could square up and start selling it hard. Expectation is for 223 k while mainstream analyst felt that anything above 210 k signal a September rate hike. We maintain the view that the daily RSI divergence is a concern but as long as the dollar is being bought with no alternative, then dollar will continue to reign.

German Bund

Daily

4 hour

4 hour Bunds found support at 38.2% Fib retracement but it has also broke below the rising trend line. We were expecting a retest on the break out but price action hit resistance on the daily 5 EMA twice on 153.90 levels. Daily chart still have Bunds trading above the 20 ma and a hard close below will take Bunds much lower. A daily break and close below the 20 ma will get us to target the 76.4 Fib at 150.78 where we look to enter a potential swing long.

If Bunds come to resistance, expect EUR/USD to come to support and potentially a viable trade to long Euro if and when dollar hit resistance and create a swing high failure.

Eur/Usd

Daily

4 hour

At the moment, Euro found support – a higher low from the purple trend line that has been tested 4 times and if this breaks below then things will get ugly quick. Only a break above the red trend line (see daily) will give Euro a boost higher – all eyes on the dollar index –Bunds has head lower (an early signal?) NFP data will determine the next directional play.

German Dax

Daily

4 hour

Run up on EZ equities because of dollar imminent rate hike = Lower Euro = Higher DAX. However, we note dollar index into resistance so will keep an eye on it. We will not discount out the possibility for one more move up to hit PRZ at 700-730 levels.

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