Boom – US jobs report drives US dollar and stocks higher

November 11, 2013

204,000 jobs created in the United States in October  was so far above consensus forecasts that it is not funny. The pundits guesstimates of 125,000 shows the folly of trying to pick one number and the folly of trading before a number unless you have a really solid reason.

I went to bed short AUDUSD on Friday night because all the data had printed stronger recently and the 125,000 forecast was so ludicrously low that it seemed like the probability of a higher result was skewed in favour of a stronger number in way that doesn’t often happen.

The Aussie didn’t actually fall as far as I had hoped but hey with a bit of leverage it turned out to be a pretty good percentage earner.

By the looks of things the Aussie is headed back to the support level at 0.9280 we were talking about last week.

On the stock market even as the rally continues to cry of the bears grows – and not without merit.

At the close the Dow was 168 points higher at 15,762 for a gain of 1.08%, The Nasdaq rose 1.6% and the S&P 500 reversed the fall of the previous day rising 24 points or 1.37% to 1771. The technicians suggest that the S&P 500 is still stalling at the top of a multi year uptrend and Henry Blodget wrote a great piece on valuation over the weekend which is a must read. You can find it here.

What you cant see in the chart above is that the highs are on the top of a multi year trendline. My trading approach suggests that the S&P is biased down and I would be short unless or until the high is taken out and then go flat for a while.

SPI 200 contracts ended the week up 55 points at the close on Saturday.

Bonds also rose sharply along with stocks which is somewhat incongruous if bonds are worried about higher rates and maybe even Dectaper but stocks are not. It just adds another headwind to a stock market looking stretched. Anyway at the end of play US 10’s were up 15 points to 2.75%, Gilts rose 10 points to 2.61% and Bunds were 7 points higher at 1.76%.

In Europe stocks missed most of the US stock rally and will likely rally tongiht but the US rally had reversed serious early losses in European markets and at the close the FTSE was 0.16% higher, DAX was largely unchanged down 0.03%, the CAC slid 0.49% on the back of the French downgrade to AA from S&P 500 while stocks in Madrid and Milan fell 0.52% and 0.07% respectively.

On Forex markets the US dollar got a solid lift on the back of the stronger than expected non-farm payrolls with the USD Index ending the week with confirmation that the break last week of the down trend from July was not a fluke, at least technically. At the close Euro sat at 1.3370, Glenn Stevens got his wish and the Aussie fell to 0.9383, GBP was relatively strong all things considered at 1.6015 and USDJPY broke higher to 99.06 by the close. That is a big technical break so watch for the Nikkei to see if it can do likewise in Asian trade today.

On commodity markets Bitcoin continues on its tear making a new high at 395 over the weekend as the bubbleish trade continues – it is around 327 at the moment. This is an amazing juxtaposition with Gold’s big selloff back to $1283 over the weekend, down 1.83%. Nymex Crude was 0.42% higher, copper remained at $3.26 lb, while over in the Ag pits corn was 1.49% higher, wheat fell 0.50% and soybeans fairly roared up 2.13%

Besides the non-farms China released some important data over the weekend as well with CPI inflation only rising 3.2% year on year, slightly below the 3.3% expected. Industrial production was 10.3% from 10.% expected and retail sales undershot by a smidge at 13.3%. Reasonable data and it shouldn’t detract from any US induced rally in Asia today.

In the next 24 hours however it should be fairly quite given it is veterans day in the US and Armistice day in France. Don’t forget to buy a Poppy.

But in Australia we have home loan data, a speech from German Bundesbank President Weidmann tonight

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