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03/07/2014: The impact of the strong Non-farm Payrolls on key market levels

Non-farm Payrolls smashed expectations today. This was one of the few occasions that the release of the ADP private payrolls ultimately gave a very strong indication to the Non-farms (This will also mean that next month’s ADP will be very closely watched).

Non-farm Payrolls jumped by 288,000 jobs in June (ADP shows a 281,000 rise) which was significantly higher than the 212,000 jobs that had been forecast by the consensus. However this is not the only strong element to the report. Unemployment fell to 6.1% unexpectedly below the 6.3%, whilst the average hours worked was in line with forecast and the monthly wage growth was also in line with the 0.2% month on month growth forecast. This payrolls report will put pressure on Janet Yellen who remains on the dovish side in her comments (although she did yesterday mention the potential impact of lower volatility expectations).

This is all dollar positive and the forex majors have all moved with that in mind. This means that the dollar has broken through some key support levels today. This means it is time to restate the new support levels moving into the afternoon.

  • EUR/USD has breached $1.3640 and that now opens the next key low at $1.3585. This puts the outlook for the euro back under big pressure again as if the euro were to fall through $1.3585 then this would confirm a negative outlook once more.
  • GBP/USD has breached the initial line of support at $1.7130 which has opened $1.7100. However the initial reaction has been for sterling to hold up fairly well and there has not been too much selling pressure yet. The longer term bullish outlook for Cable would suggest that any weakness will be bought into, ideally this would come around $1.7060 though.
  • USD/JPY has pushed strongly above the 102.00 pivot level and is now in direct challenge of the 102.20 resistance. Any breach of this resistance would now suggest the outlook for the dollar is positive. Traders will now be looking towards the pivot level around 102.00 as probably an opportunity to buy.
  • Gold has broken below the support band around $1320 and this has opened the $1310 support but also the key near term range low at $1306. The outlook had been looking more positive for the gold price until this Payrolls report has just muddied the waters again. The price has not significantly been impacted, but it could put gold on a new corrective path due to the strength of the dollar.
  • European equity markets have drifted higher and just carried on from this morning’s gains. It could be interesting this afternoon as Wall Street gets going as it did react too significantly to yesterday’s ADP report, so today it may push higher. There is also the impact that it is a shortened session due to a 1pm close US time for the Independence Day holiday. The S&P 500 has opened around 3 points higher and is pushing on in early trade, whilst the Dow has opened above 17000 for the first time ever. Equity markets looking strong.

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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.