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How will USD react to NFP amid coronavirus?

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03.06.2020

The US NFP will be reported on Friday, June 5, at 15:30 MT time.

Instruments to trade: EUR/USD, USD/JPY, GBP/USD

NFP is the essential indicator that depicts the US economic health. It is released shortly after the month ends. It’s a must-see for every trader as most times it has a huge impact on the market. There is a general rule that USD will rise, if NFP is better than expected. Nevertheless, the coronavirus reality breaks all rules. The market doesn’t react now as most expect it. The reason is USD has a safe-haven title and it goes up, when the market sentiment is risk-off. Last time on May 8, non-farm payrolls were better than forecasted, USD movements were mixed as firstly the greenback dropped on a risk-on sentiment after the report, but then climbed the next day. Anyway, the report is more likely to bring fresh volatility in the market and create great trading opportunities.

Catch the impulse after the report and join the market movement.

 

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Risk-on sentiment eased on June 4

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04.06.2020

The market takes a breath after the rally up. What is next?
Stocks have a pause

S&P 500 passed the 3100 mark, unseen level since March. The reopening of economies and stimulus packages across the world improved the market sentiment. Investors believe that the worst is over. And, according to Bloomberg, we’ll see more support for the stock market.

Moreover, the US ADP private payrolls were much less than analysts expected. The data showed that only 2.76 million lost jobs, when 9 million were anticipated. That’s still a poor data, but it’s a sign that the economy is moving in the right direction. Today traders will wait for the US unemployment claims at 15:30 MT time.

Let’s look at the S&P 500 chart. Yesterday it showed the best 50-day trading stretch. If the price advances further, it may ramp up to the March 3 high at 3250. Support levels are 3000 and 2935.

OPEC+ meeting in doubt

Oil closed at the highest level since March: WTI - $37 and Brent - $40. However, today prices slightly contracted. Most investors are in a wait-and-see mode ahead of the OPEC+ meeting. The question is for how long the oil alliance will cut supply. If they agree to extend cuts till the end of the year, it will definitely push prices up. Look at the Brent oil chart below. The price is exactly under the 100-day moving average. If it breaks through it, it will surge up to $45. Support levels are $36 and $34.


To trade Brent with FBS you need to choose BRN-20N.
Gold dropped under risk-on

XAU/USD couldn’t find any demand in such a risk-on atmosphere. The price fell down to the support level at 1700. The next support is at 1680. Resistance levels are 1730 and 1750. Gold set a really bullish trend. And, it’s unlikely that it will reverse soon. It looks more like a short term contraction. Tomorrow NFP at 15:30 MT time should add some volatility to the market. Be ready!


ECB statement today

The European Central Bank will have a meeting today at 14:45 MT time and then later hold a press conference at 15:30 MT time. Click here to know how to trade EUR after the ECB statement.

Check the economic calendar

 

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NFP forecasts from 10 major banks

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05.06.2020

Today is the big day! Investors are waiting for NFP at 15:30 MT time. NFP shows the change in the number of employed people during the previous month, excluding the farming industry. Today it will reveal the employment change in May. It’s one of the most important indicators for all traders as it causes strong market movements. Here below you’ll find predictions from 10 major banks. Their forecasts vary from -2.2 million to -10 million. The most common one is -8 million.

RBC Economics

RBC Economics provides economic analysis and forecasts to the largest bank in Canada - the Royal Bank of Canada and its clients. They anticipate a 2.2 million decline in payrolls after April’s 20.5 million drop and a further increase in the unemployment rate to 20%.

Wells Fargo

It’s the world's fourth-largest bank, located in San Francisco. Wells Fargo’s analysts believe non-farm payrolls will drop by 8 million and the unemployment rate will climb to 20%.

NBF

NBF is abbreviation for the National Bank of Fujairah in the United Arab Emirates. They expect the US employment to drop by 7.5 million.

CIBC

The Canadian Imperial Bank of Commerce, commonly referred to as CIBC, is one of the "Big Five" banks in Canada. CIBC analysts suggest that around 6 million jobs were shed in May and the unemployment rate will rise by 18.6%.

ING

The ING Group is a Dutch banking and financial services corporation headquartered in Amsterdam. The expect the huge 10 million drop in non-farm payrolls and a rise in unemployment to 20%.

Westpac

Westpac is the Australia's first bank, located in Sydney. Its economists predict a 7.5 million decline in employment in May and the unemployment rate to peak at 20%.

Deutsche Bank

Deutsche Bank is a multinational investment bank and financial services company headquartered in Frankfurt, Germany. Its analysts forecast a 6.1 million drop in nonfarm payrolls, with the unemployment rate rising to 19.1%.

Danske Bank

Headquartered in Copenhagen, it is the largest bank in Denmark and a major retail bank in the northern European. Danske Bank’s analysts think that employment in the USA has dropped by 10 million. However, they mentioned that we may be too pessimistic.

TDS

TD Securities is a reliable Canadian investment bank. According to economists at TD Securities, the -8 million consensus for payrolls is too weak. Their forecast is -3 million. The TDS expects less weakness than consensus in the unemployment rate as well: a 2.8% rise to 17.5%, versus 19.5% for the consensus.

Goldman Sachs

It’s an American multinational investment bank, headquartered in New York City. Analysts at Goldman Sachs expect a 7.25 million drop in payrolls and a jump to 21.5% in the unemployment rate.

Follow the NFP report at 15:30 MT time today and catch the market movement!

 

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Market movers on June 8

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08.06.2020

Oil prices surged after successful OPEC+ meeting

OPEC+ members have signed a significant deal to cut the oil supply by 9.6 million barrels a day next month. In addition, any country that failed to fully implement output cuts should compensate it during next months. Also, keep in mind that countries a reopening and demand is recovering. That all played well for oil prices: WTI oil opened today at $40 a barrel and Brent oil – at $43. It’s the highest level for over three months! Here below you can see how U.S. Energy Secretary Dan Brouillette welcomed the deal on Saturday.


Let’s look at the Brent oil chart. It’s headed towards 50% Fibonacci retracement level at $45. And, this price is likely to be reached soon. The next retracement level will be at $51.5. Support levels are $39 and $36.

S&P 500 is aggressively climbing up

First of all, look at the chart. You’ll see really great performance of S&P 500. The price has passed $3190. If it crosses the retracement level at $3250, it will clear the way up towards $3335. Support levels are 3110 and 3000. What is the reason of such a fast growth? The reason should be the optimistic market sentiment as economies are reopening.

Gold is recovering its losses

The recent drop of the shining metal seems to be in the process of restoration: XAU/USD is one step away from testing $1,700. Noting the cloudy status of the US-China relations, we are likely to see that cross upwards pretty soon.

 

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FOMC statement on June 10

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09.06.2020

Instruments to trade: EUR/USD, USD/JPY, USD/CHF

On June 10 at 9:00 MT time the Fed will report updated economic and financial guidelines — the first ones since last December. Also, later at 9:30 MT time the FOMC will held the press conference. There are no doubts that rates won’t go below zero as the US economy has a real potential of a V-shaped recovery as S&P 500 has almost reached the pre-crisis level. Some analysts consider that may be it’s time to even increase rates as the NFP data was encouraging. The May jobs report showed that only 2.5 million people lost jobs, while economists anticipated 8 million. Also, the unemployment rate turned out 13%, when the forecast was 20%. It was a breath of a fresh air after a long time of the negative market sentiment.
How the Fed will react to all this?

Despite a positive May jobs report, it’s highly expected that the Fed won’t change the interest rate policy and will continue stimulating the economy. According to Sam Bullard, senior economist at Wells Fargo, rates will remain near zero until the end of 2021.

Some analysts wonder that the Fed may stop its quantitative easing program on the positive tone as the economy is improving. While others think that authorities will leave its policy unchanged and wait for better indicators “until the economy has weathered recent events and is on track to achieve maximum employment and price stability”. Their quantitative easing has been reduced significantly with just $4 billion dollars per day of Treasury purchases scheduled for the coming week versus 75 billion dollars at the peak of the crisis. The Fed is likely to continue the purchases in the amounts that would be needed. On the economic outlook, most strategists think the Fed will once again focus on the severity of the situation and downgrade risks, but also may mention that the economic activity is bottoming out.

Check the economic calendar

 

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Market outlook on June 10

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10.06.2020

USD is still loosing positions against major currencies. There is a good chance to gain on it! Let’s have a closer look.

EUR is back on track

EUR had been climbing for over two weeks since May 26, but it dropped on Friday after the encouraging NFP data. Nevertheless, this week EUR started on a positive footing. It’s headed towards pre-crisis highs at 1.15. Support levels are at 78.6% and 61.8% Fibonacci levels, 1.131 and 1.117, respectively.

GBP keeps rallying

Now GBP/USD is approaching the 78.6% Fibonacci retracement level at 1.2825. The British pound is likely to gain this week as UK Business Secretary claimed further easing of lockdown restrictions. If it crosses it, it will clear the way up towards the three-month high at 1.31. In opposite, if the pair fails to grow, it will meet the support level at the 200-day moving average at 1.265. If it breaks it down, it may fall deeper to 1.25.

Gold is moving up

XAU/USD reversed after the pullback last week. It’s going towards the retracement level at the high of May 29 at $1730. If it breaks it out, it will open doors to the highest point for over 8 years at $1750. Otherwise, if it starts falling, it will meet support levels at $1700 and $1680.


USD/JPY is steeply falling down

USD/JPY has easily passed the support at 107.5. Now it’s getting closer to the next support at 107. If it crosses it, it may plummet even deeper to 106. However, if some factors push USD/JPY up, the pair will meet the resistance – the 200-day moving average at 108.5.

 

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Main market drivers on June 11

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11.06.2020

Risk-off prevails on the market. Consider trade ideas that presented below.

Fed statement

Yesterday Jerome Powell, the Chairman of the Fed, made a rate statement and gave economic guidelines. All market participants waited for that big event. The Powell’s speech was quite dovish. He claimed that the Fed will continue pumping stimulus until the US employment comes back to pre-crisis rates. Jerome Powell was really clear to leave rates below zero for longer: “ We’re not even thinking about thinking about raising rates”. According to him, the Fed will use all its tools such as low interest rates and enormous amounts of bond purchasing as long as it takes. The economy faces “considerable risks” over the medium term, the Fed mentioned in its statement.

Stocks slumped

Fears of a second coronavirus wave and the caution from the Fed pushed stocks down. S&P 500 is trading near the 78.6% Fibonacci level at 3140. If it breaks it down, it will open doors towards the support at 3000. However, if risk-on comes back soon, stocks can rise again and meet the resistance at 3300.


Gold contracted

Gold prices closed lower yesterday, the first time after three sessions going up. The Fed claimed that it will hold rates near zero at least through 2022. That makes gold a favorable asset for investors in the long term. However, the future risk-on as economies are recovering may weigh on gold prices. XAU/USD is moving down towards the support line at $1725. If it crosses it, gold may fall even deeper to the key barrier at $1700. The resistance is at $1750.


GBP/USD dropped

The Fed’s guideline for the future slow recovery has set risk-averse on the market. The British pound fell down yesterday. If GBP breaks through the 200-day moving average and the support at $1.265, it will be a pivotal moment for bearish traders as GBP may fall even deeper to the key 1.25 psychological mark after that. Nevertheless, if any positive news pushed the British pound up, it will meet the resistance at 1.2825.

Oil decreased

American crude stockpiles raised to a record high. That’s why, investors have fears about the future oil oversupply. Let’s look at the WTI oil chart. The price fell yesterday to $38. If it continues dipping, it will meet the support level at $34 and then at $30. However, oil prices are unlikely to fall down so far. Economies are recovering and the oil demand will increase at the same race. The resistance is at $47.5.

 

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Be ready for the next market fall

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16.06.2020

All of us have the fear to loose money. And, when the market crash happens, most of us keep it to ourselves. However, it’s not the best approach as we just sit and loose the potential profit we would have, if we were a little bit braver. So, let’s learn what every trader should do, when the market falls again.

Keep calm

Yes, it’s hard to leave emotions aside, but it’s so important not to panic in times of market crashes. For example, in 150 years the S&P 500 fell by 30% or more 15 times, or about once a decade on average. And what does always happen next? It recovers again and again. Sometimes it takes months, less often – years. It’s not a good idea to park your money in the stock market in these moments, but if you already have them, it will be better to hung on as stocks will rebound anyway. While many investors panic and sell all their stocks settling for low prices and possibly even significant losses.

Make a wish list

The most famous investor Warren Buffet said: “We [he and partner Charlie Munger] simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”. Make now a wish list of stocks you’ve always wanted. So, the next time, when the market crash happens, you’ll enjoy buying all of them at very low prices. And then the market bounces back, prices will surge and you’ll gain.

Make an emergency fund

This extra money will give you an opportunity to buy assets at good prices from your above wish list. Moreover, you won’t depend from any unforeseen factors.

Diversify your portfolio

Don’t focus only on one currency, stock or any asset. Rebalance your portfolio and you’ll reduce your risks significantly. Finally, be ready to react, monitor the market, remember that even the bearish stock market is an opportunity!

 

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What drives the market on June 17?

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17.06.2020

The market sentiment is mixed today. How to trade in such an uncertain environment?
Fundamental factors


The Fed’s chairman Jerome Powell reported yesterday: “until the public is confident that the disease is contained, a full recovery is unlikely.” He anticipates the long way for economy to stabilize as levels of output and unemployment are still well below pre-crisis levels. He pointed to the widening gap between rich and poor in the USA as the crisis hit mostly low-income Americans and minorities.

The new coronavirus outbreak happened in Beijing. China imposed strict restrictions. Also, Florida reported record new cases. Concerns about the second wave raised.

Nevertheless, 1 trillion dollars from the Trump administration encouraged investors as well as the Federal Reserve has started to buy individual corporate bonds.

Technical tips

EUR/USD

EUR/USD formed the head and shoulders pattern on the 4-hour chart. If the price falls below the neckline support at 1.1200, it will drop even further after that. Also, the MACD indicator signals the bearish prospect for EUR as it went below zero. Otherwise, if the price crosses the left shoulder's high of 1.1350, it will open doors towards new highs near 1.1400.

S&P 500

S&P 500 has been climbing up the fourth day straight. Now it meets the resistance at 78.6% Fibonacci level at 3135. The move above this line will set a further bullish trend. The next resistance will be at 3230. Nevertheless, if the price drops below the key psychological support at 3000, it may fall even deeper to 2930. Watch closely!

XAU/USD

Gold is trading near $1730 last days. There are no huge price movements because market participants are hesitating as both risk-off and risk-on factors weigh a lot. On the economic side, the second round of Fed’s Chairman Jerome Powell and the US housing data can give additional hints to gold traders. The resistance is at 1750. Support levels are 1715 and 1700.

Coming market events:


The Canadian consumer price index at 15:30 MT time will give the fresh stimulus. If the data is better than expected, CAD will rise.

The US housing data will be published at 15:30 MT time.

The second round of the Jerome Powell’s speech will be at 19:00 MT time. It will influence the overall market sentiment.

Check the economic calendar

 

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Market news and trade ideas on June 19

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19.06.2020

Risk-averse weakened and riskier assets climbed up. Let’s have a closer look.
Fundamental factors


The Bank of England cut its bond-buying program by about a half. Investors believe it’s too early as there is still a real potential of a second coronavirus wave. Of course, GBP fell down yesterday after the announcement. Also, the possible no-deal Brexit is another negative factor that can push GBP down in the long run.

The USA and China are suffering from the coronavirus resurgence. New cases in Florida exceeded the past week’s average and Texas hospitalizations jumped by another record.

Tensions between China and the USA are growing. According to the Chinese professor Wang Jisi, “China-US ties today worse than Soviet-US relations during the cold war”. Lu Zhengwei, chief economist at the China Industrial Bank, said that the Chinese issue will be one of the key points during the US presidential election, which may lead to disruption in the Chinese economy, mostly in market expectations.


Technical tips
GBP/USD

The British pound has gained today after falling down the whole week. Now it’s captured between the 100-day moving average above and the 50-day MA below. If it breaks through the above resistance at 1.2500, it will surge further to 1.2680. Otherwise, the move below 1.2400 can push the price down to the support at 1.2300.

S&P 500

Today S&P 500 is heading towards the two-weeks high at 3230. It has almost crossed the 78.6% Fibonacci level at 3135. However, if risk-averse comes back the next week, it may drop to the support at the key psychological mark at 3000.

XAU/USD

Gold has gained on the weak US dollar and surged up. It’s going to the resistance level at 1740. If it crosses it, it will rise further to 1750. Otherwise, if it falls down below the support $1720, it may drop even deeper to 1700.

WTI crude oil

Oil prices rose on the recovered demand as lockdowns eased in most countries. The WTI oil is approaching the three-months high at $40. The move above may push the price even higher to the resistance at the 200-day moving average at $45. Nevertheless, if it falls down, it will meet support levels at $34 and $30.


Upcoming events

The ECB economic summit will be held today. Authorities will discuss the economic outlook in the context of COVID-19.
The Canadian retail sales will be published at 15:30 MT time.