European Market Outlook: Market Awaits the US Jobs Report

MARKETS

FOREX: It was a fairly low-key affair in Asia-Pacific region, the dollar made some modest gains against its peers on position adjustment ahead of tonight’s Non-farm payrolls. Dollar-yen opened at Y115.35 and trading in a Y115.07 to Y116.13 range, last at Y 115.70. Euro-dollar eased lower from $1.0613 to $1.0575 and was last at $1.0586. Aussie-dollar opened at $0.7338 and held a $0.7325 to $0.7353 range. There was muted response to the Australian Trade Balance, against expectations, Australia posted its first surplus since 2014. The focus has largely been on China and the CNH, where funding costs continue to dictate direction. Speaking of Cnh, dollar-cnh held a cnh6.7894 to cnh6.8408 range, overnight funding costs blew out to 700 pips before easing to around 3 00 pips, but still very expensive. Dollar-cnh was last at cnh6.8228

US INDEX FUTURES: US stock index futures are trading flat to mixed as the market awaits the US jobs report later in the session. Currently the Mar’17 e-mini S&P futures are trading flat 2 ,264.25, the Mar’17 e-mini Nasdaq futures are trading up 1.00 point at 4,963.00 while the Mar’17 e-mini Dow futures are trading up 1 point at 19.824 . Thursday saw US share markets suffered their first losses of the New Year and it looks like Dow 20,000 will be later rather than sooner as the blue chip gauge yesterday retreated 42.87 (0.2%), closing at 19,899.29 while the S&P 500 edged 1.75pts (0.1%) to 2,269.00. Although the Dow and S&P’s losses were rather modest, the Russell 2000 gave up all of its good work of Wednesday, tumbling 1.15% yesterday, to 1,371.94 while the Nasdaq Composite bucked the trend with a 10.93pt (0.2%) gain, to 5,487.94, a new all-time high, led higher by the likes of Facebook, Amazon and Baidu.

US TSYS: Cash treasuries have seen a quiet start to Friday’s session ahead of the pivotal employment data later today, while the threat of massive snow storms in the New York and Washington area could also keep trade subdued during the Asian session. Currently 10’s are at 96-29 bid of 2.354% s lightly lower than the close of 96-31 or 2.344% some ~0.9bp higher. The inclement weather is also raising the distinct possibility that there may be a delay in the release of the US Jobs report and trade data, local wires report. BMO’s Ian Lyngen notes “a quick glimpse at the charts show the long-bond has broken the downward – sloping trend – line we’ve been following-and decisively so”. He says “we’re now through the 3.00% handle change as well, which puts the focus on the opening gap at 2.945% to 2.9495%.

JAPAN STOCKS: Japanese stocks have eased only slightly during Friday’s morning session, as the Yen pares its overnight gains. Trump’s tweets over Toyota’s plans to build cars in Mexico has seen the stock weaken slightly, in line with other Japanese car makers. The Nikkei has closed for lunch down 0.40% or 78.51 points at 19,44 2.18, while the Topix is last 0.39% or 6.08 points at 1,549.60.

GOLD: Spot gold last down $2.65 at $1,177.55 per ounce, in a $1,181.55 to $1,176.85 range so far this morning in Asia, with the market paring Thursday’s gains as the off shore Yuan weakens as funding eases, which has seen the US dollar rally across the board. Technically Dolefin’s Stefan Steinmann “chances that a downside retracement in Gold from the Jul 2015 top has ended in December near $1,123 are fairly goo d”. He believes “still, further corroborating action is required to diminish decisively the downside risk, especially as long as the price stays below $1,250 the decisive multi-month downside structure prevails”. Steinmann notes “during January we could see hesitation in the $1190-$1220 region.

OIL: WTI crude oil futures for Feb’17 delivery last down $0.03 at $53.73 per barrel, after a $53.85 to $53.68 range in Asia today, with the market trading quietly as the market digests the latest US oil stock pile drop and Saudi Arabia’s output cut. Thursday saw close Feb’17 WTI up $0.50 at 53.76, with the market seeing a $54.12 to $52.79 range.

 

Technical Analysis
BUND: (H17) Lacks Follow Through Below 21-DMA
BUND: (H17) Lacks Follow Through Below 21-DMA

  • RES 4: 165.26 Monthly High Nov 9
  • RES 3: 164.92 100-DMA
  • RES 2: 164.33 Hourly support Dec 3 now resistance
  • RES 1: 163.76 Hourly resistance Dec 3

PREVIOUS CLOSE: 163.45

  • SUP 1: 162.75 21-DMA
  • SUP 2: 162.62 High Dec 14 now support
  • SUP 3: 162.04 Low Dec 19
  • SUP 4: 160.80 Low Dec 12

COMMENTARY: The failure to close above 165.26 has resulted in a sell-off that eases immediate bullish pressure and sees immediate focus now on the 162.04-62 support region. Bears now need a close below 162.04 to shift immediate focus back to 159.91 and overall focus to 158.67-159.14 where the weekly bull channel base is located. Initial resistance is noted at 163.76 but bulls look for a close above 164.33 to see the 100-DMA pressured once more.
EUROSTOXX: Lower Daily Highs A Concern For Bulls
EUROSTOXX: Lower Daily Highs A Concern For Bulls

  • RES 4: 3464.81 Low Dec 2 2015 now resistance
  • RES 3: 3394.83 High Dec 7 2015
  • RES 2: 3345.20 High Dec 17 2015
  • RES 1: 3334.44 2017 High Jan 3 2017

PREVIOUS CLOSE: 3316.47

  • SUP 1: 3290.52 High Dec 30 now support
  • SUP 2: 3259.27 Low Dec 22
  • SUP 3: 3239.87 Low Dec 16
  • SUP 4: 3206.82 High Dec 12 now support

COMMENTARY: Fresh 2 year highs continued for the index Tuesday but the lack of topside follow through remains a concern when combined with daily momentum divergence and a slow stochastic study overdue a correction from O/B levels. In saying that, bears still need a close below 3290.52 to ease immediate bullish pressure and below 3259.27 to hint at a deeper correction back to the 55-DMA (3124.13).
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