Euro hit by a dovish Draghi, but we’re all awaiting non-farms tonight

April 4, 2014

196,000 give or take 20,000 is the key to trade into the end of the week.

That’s how many jobs the market pundits surveyed by FXStreet reckon were created in the US economy last month.

The data to be released at 11.30pm AEDT this evening will set the tone for views on the economic health of the US economy as well as the markets view on the taper and interest rates.

It will impact stocks, currencies and gold for weeks to come. So it’s not a time to go to bed without your stops in place tonight.

Last night though the data in the US undershot expectations with jobless claims higher than expected and the service sector of the economy printing weaker than expected.

The implications were that the ASX is a little lower in overnight trade with the SPI 200 June futures off 3 points to 5406 bid.

At the close the Dow is flat at 16,573, the NASDAQ fell out of bed losing 0.90% to 4,238 and the S&P 500 lost just 2 points to 1,889 for a 0.10% loss.

In Europe Mario Draghi showed what a bind the ECB is in in trying to combat the move toward deflation. James Shugg of Westpac London this morning on ABC Overnights said that 20% of the EU is already experiencing deflation with a further 20% close to deflation. But he also noted that while Draghi noted the ECB talked about QE Draghi said they don’t yet have the tools.

So at the close the FTSE was lower down 0.15% to 6,649 after the UK services PMI printed lower than expected. On the Continent however stocks ignored the EU, German and Italian Services PMI weakness with Milan and Madrid up a robust 1.38% and 1.42% respectively while the Dax rose a smidgen to 9,629 and the CAC was 0.41% to 4,449 – an almost 6 year high.

In Asia yesterday the news of the Chinese mini-stimulus left traders in Shanghai cold as the exchange dropped 0.73% to 2,044. The Nikkei however did better rising 0.84% to 15,072 for a break intra day of the trendline we identified yesterday but it has slipped back in overnight trade along with USDJPY.

Currency markets is where Draghi’s comments found the most resonance with Euro down off a high of 1.3805 yesterday to sit at 1.3715 this morning and very close to trendline support.

This trendline stretches bck to June 2013 and is a lower, parallel, line which formed lows and highs since mid to late 2012. So if 1.3670ish gives way it will be a big step change for the Euro. Watch non-farms to either confirm or deny the trend.

Sterling was also lower back below 1.66 at 1.6594 this morning while USDJPy was largely unchanged at 103.90. The Aussie held in well as it looked under pressure at the end of the Asian trade and it sits at 0.9224 this morning.

On commodity markets gold has slipped a little again to $1,287, Copper sits at $3.05 lb and Nymex crude is back above $100 Bbl just at $100.34. On the Ags Corn rose 0.86%, Wheat rose 1.01% and soybeans rose 0.89%.

On the data front there is nothing material out in Asia before we get German factory orders and then non-farm payrolls in the US.

Have a great day and good hunting.

Greg

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