Weekly Trading Notes – Commodities and Non-farm Payrolls to drive markets


  • Market sentiment remains under pressure as the growth indicators continue to underwhelm. Commodity prices are taking the main brunt of the strain as China continues to dampen its economic growth and the concerns over its equity market volatility remain. Problems remain in the oil market as oversupply and the perceived lack of global demand is dragging prices back towards their 2015 lows again. Base metals prices are also back at multi-year lows too. Equity markets with exposure to commodities are feeling the pressure. Gold is consolidating after its own sharp declines, but I still see this as an unwinding of the selling pressure as opposed to part of a basing process.


  • This week we could get more of an idea of the prospects of a September rate hike from the Fed as the August Non-farm Payrolls Report is released. Look past the headline figure which is likely to again be around 220,000 whilst the more interest will come with the average hourly earnings. The forecast of +0.2% will mean once more the year on year growth will be around 2.0% and showing little sign of a pick-up (last August was +0.3%). Core Personal Consumption Expenditure was steady at +1.3% yesterday once more, which shows that inflationary pressures are still not yet filtering through for the Fed. However, many in the market are increasingly thinking that September will be the first hike. The ISM Manufacturing data was disappointing but not enough to significantly change expectations and a solid payrolls report this week will do little to change that view. It is likely though the Jackson Hole could provide the clues at the end of the month.
  • There is little real movement on the dollar as the forex majors have fallen into a summer lull consolidation mode. Perhaps they are settling in and aside from any significant fundamental events that impact across risk appetite, maybe traders are taking a break before the impact of tightening. The big change in the past 24 hours has been the Reserve Bank of Australia which has just tweaked policy to be less dovish, opting against jawboning the Aussie lower as it noted the recent weakness driven by falling commodity prices have weakened the Aussie sufficiently enough. It will be interesting to see if the Aussie starts to track a rebound.
  • The other interesting feature of market movement is that the US yield curve is not as steep as perhaps it could be in preparation of a Fed rate hike. Looking across the yields, the 5, 10 and 30 year are all lower in the past few weeks with the longer dated bonds all at 3 month lows.
  • Equity markets continue to fly around with a lack of any real trend and big swings across a trading week. It is difficult to hang your hat in any camp at the moment and with ultimately it does not seem as though earnings season has managed to provide Wall Street with any direction.
  • On the data front the service sector PMIs will be the key driver of sentiment on Wednesday, whilst the ADP Employment Report could be seen as a harbinger for the Payrolls on Friday. The Bank of England is highly unlikely to move on rates still (the meeting minutes in a couple of weeks could though be of interest and show potential dissenting voices). The Bank of Japan cut is economic forecasts last month but kept the 80 trillion yen monthly stimulus in place and is not expected to make any real changes this time around.
  •  Watch for: ISM Non-Manufacturing PMI & Non-farm Payrolls/Average Hourly Earnings



EUR/USD – With a series of lower highs I am a seller into rallies       

  • There is little real driving direction but the dollar data this week could provide us with some near term moves. The lack of buying pressure despite the weaker ISM manufacturing data was interesting and suggests that the market is still contemplating a potential September rate hike. The payrolls data (specifically the earnings growth) will be a driver at the end of the week).
  • In the past two months a series of lower highs is in place, flanked by the resistance of the falling 144 day moving average. Momentum indicators are neutral to bearish and suggestions are still pointing towards using any rallies as a chance to sell for pressure back on the lows $1.0810/$1.0820.
  • Watch for: ISM Non-Manufacturing PMI & Non-farm Payrolls/Average Hourly Earnings

GBP/USD – Choppy trading to continue, with data driving moves

  • Cable has all but flat-lines in the past week as a series of indeterminate economic data releases have been unable to drive direction. This still remains the likely course for trading in the coming weeks as the debate continues over when the US will move on rates. For sterling it could be the minutes from this week’s BoE policy meeting that could prove to be a big driver, but it is still too late to see a change of policy in the official announcement.
  • There is little real technical direction Cable is seemingly stuck rangebound between $1.5450/$1.5690. Until we see a decisive close clear of the range it would be a risk to play for any breakout.
  • Watch for: UK Services PMI, ISM Non-Manufacturing PMI & Non-farm Payrolls/Average Hourly Earnings

USD/JPY – Resistance around 124.50 remains the key medium term level to overcome

  • The tendency for a stronger dollar on the move towards tightening should add pressure on the resistance levels but as yet the breakout is still not coming. The BoJ is expected to stand pat once more and the onus will be on the US data to drive the pair forward.
  • In a similar fashion to Cable there has been little real direction from Dollar/Yen for a while and mixed signals give us little clue as to the breakout direction. Pressure is greater on the resistance at 124.50 but in the absence of a decisive closing breakout then the risk remains with false breakouts.
  • Watch for: ISM Non-Manufacturing PMI, BoJ Monetary Policy & Non-farm Payrolls/Average Hourly Earnings

Gold – Sell the bounce

  • Commodities have been under pressure across the board in recent weeks but gold has managed to settle into more of a consolidation in the past 10 days. A stronger dollar tendency should be a drag on the gold price and this is likely to prevent any serious rebound from taking hold before the sellers return once more.
  • Resistance levels come within the consolidation band at $1105.60/$1109.50 and $1118.70. Much beyond that the price is pausing for breath. The technical signals suggest that rallies are a chance to sell still and this is likely to put pressure on the key $1077 low. A breakdown opens $1043 and potentially the $1000 mark.
  • Watch for: US data driving the outlook, ISM Non-Manufacturing PMI & Non-farm Payrolls/Average Hourly Earnings

Indices – Wall Street unable to gain traction, DAX is outperforming again on lack of commodities exposure  

  • S&P 500 – Earnings season continues but is still unable to drive the market forward. The result is a continuation of the truncated moves in the past few months, unable to generate a consistent trend. The result is that the S&P 00 now faces a support band 2040/2060 and a resistance band 2120/2135.
  • DAX Xetra – As the near term momentum picks up again this still only seems to be within a choppy trading period through the past few weeks. The DAX is though still managing to perform better amidst the commodity price pressures due to its lower exposure to the basic resources. The big resistance level still comes in 11,800/11,920 with a support band 10,800/11,050.
  • FTSE 100 – Whilst other market trade sideways it appears that the big weighting in basic resources sectors is a drag on the FTSE 100. A series of lower highs is forming with each of the rebounds and this has to be a concern for the bulls. While commodities remain under pressure it is difficult to see the FTSE managing a sustainable rally. Support band 6432/6500.



Tuesday 4th Aug

  • US – Factory Orders
  • New Zealand – Unemployment

Wednesday 5th Aug

  • UK – Services PMI
  • US – ADP Employment Report
  • US – Trade Balance
  • US – ISM Non-manufacturing PMI
  • US Crude Oil Inventories

Thursday 6th Aug

  • Australia – Unemployment
  • UK – Manufacturing Production
  • UK – BoE monetary policy
  • US – Weekly jobless claims

Friday 7th Aug

  • Japan – BoJ monetary policy
  • US – Non-farm Payrolls
  • US – Average hourly earnings



Tuesday 4th Aug

  • Eurozone – German ZEW Economic Sentiment

Wednesday 5th Aug

  • China – Industrial Production
  • UK – Unemployment & Average Weekly Earnings Growth
  • US – JOLTS job openings
  • US Crude Oil Inventories

Thursday 6th Aug

  • US – Retail Sales
  • US – Weekly jobless claims

Friday 7th Aug

  • Eurozone – CPI (final)
  • Eurozone – GDP (flash)
  • US – Industrial Production / Capacity Utilization
  • US – University of Michigan Consumer Sentiment (prelim)


Leave a Reply

Your email address will not be published. Required fields are marked *