Markets becalmed awaiting non-farm payrolls, Euro, Aussie and GBP ready to break – but which way?

May 2, 2014

We saw the future last night and it is US dollar weakness unless the data can start to print on the stronger side.

Tonight’s non-farm payrolls is the first port of call and the market is looking a rise of 210,000 jobs for April. Any substantial undershoot will see the US dollar come under substantial pressure tonight and the highs last night for the Pound above 1.69 and the Euro near 1.39 will struggle to hold them back.

Employment data is notoriously volatile due to the sampling impact and non-farms is no different so a strong number is as likely as a weak number in many ways.

The Aussie will also be impacted – last nights high was right on a little downtrend line while it sits now on the uptrend line for this rally of 2014. So something has to give soon.

Hard to see it not being a big 24 hours for the Aussie. 0.9250 and 0.9300 the key levels.

Turning back to overnight moves and it looks like the FOMC looks like it is right – consumer spending is coming back with last night’s data showing personal spending jumped by 0.9% in March stronger than the 0.6% expected. Personal incomes only rose by 0.5% which suggests the 0.9% spending is not viable longer term which the savings rate fall to 3.2% suggests. Elsewhere the ISM manufacturing data climbed to 54.9 in April from 53.7 last. Jobless claims jumped to 344,000 against 319,000 expected. Construction spending was weaker than expected up just 0.2% against expectations of a 0.5% rise.

So there is something for the bulls and something for the bears all of which meant that the competing forces left US stocks largely unchanged. The Dow fell 0.1% to 16,558, the Nasdaq rose 0.3% to 4,147 while the S&P 500 barely budged finishing at 1,883.6.

Locally the SPI 200 June contract is up 11 points to 5445 bid at 7am. We’ll see how the market goes today after the last 3 weak days after futures indicated a positive open. It’s Friday and it’s non-farm payrolls day in the US so it could be a quieter day.

In Europe Mayday kept most of the markets out but Markit still released a raft of European PMI data with the standout the strong rise in UK which jumped to 57.3.

On forex markets, currency traders were emboldened by the strong UK PMI which drove the Pound to a high of 1.6918 but it has since slipped back little to 1.6891.

Euro rests just below 1.39 at 1.3865 and USDJPY is becalmed around the 102.20/40 region. The Aussie dollar found a bit of a bid yesterday after the really solid, and surprising, move in the export/import prices. It rallied to 0.9312 but found the air too thin and is back at 0.9270 and testing the 2013 uptrend line. Non-farms the key macro theme for forex traders tonight.

On commodities gold continues to slide down another 1% to $1,285 oz. Nymex crude was also lower losing about half a percent to $99.23 while copper closed at $3.04. On the Ags it was another volatile night with Corn and wheat down 2% while soybeans fell

On the data front in Australia today we see the release of the HIA new home sales and PPI prices. But the key – and really the only thing that matters in the next 24 hours is the non-farm payrolls with the market looking for a number of around 210,000 for April.

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