- Nonfarm payroll data was mixed on Friday, with 187k jobs added in July compared with 200k forecast and June’s figure downgraded to 185k from 209k. However, unemployment fell back to 3.5% compared with 3.6% expected and previous. Wage growth also remains strong with average hourly earnings rising 0.4% m/m and 4.4% y/y
- Wall Street finished lower on the prospects of a slowing economy, and the US dollar was the second weakest FX major, behind the Canadian dollar (CAD).
- The US dollar index (DXY) fell -0.5% during its worst day in 16, and helping EUR/USD close back above 1.10 and confirm the swing low I was pondering on Friday ahead of the release
- The Canadian dollar was weaker with employment change falling -6.4k versus 21.2k expected and 59.9k previously, reaffirming views that the BOC are unlikely to be hiking again any time soon. Ivey PMI data also disappointed and contracted for the first time since July 2022.
- With the majority of major markets we track posting weekly high-to-low ranges above their 10-week ATR, it seems August is not playing along with its seasonal tendency of being dull. But then it is debatable as to whether the excitement that July and August so far has offered.
- The RBA lowered their growth forecasts through to December 2024 in their quarterly SOMP (Statement on Monetary Policy)
Events in focus (AEDT):
- 09:50 – BOJ’s (Bank of Japan’s) Summary of Opinions
- 11:30 – Australian job advertisements (ANZ)
- 16:00 – German industrial production
- Public holiday in Canada
- The S&P 500 formed a bearish engulfing candle formed on the weekly chart and on Friday. Next support levels include the June high at 4458.48, and the bullish trendline from the arch low.
- USD/JPY formed a bearish hammer week and traded lower for a second day on Friday. The bulk of trading activity has taken place between 138.65 – 142 over the past four week, so perhaps a move to 141 or even 140 could be on the cards
- An inverted hammer formed on the AUD/JPY daily chart, which held above the February high on Thursday and Friday to suggest 93.13 as an important level of support for bulls to defend
- Prices are coiling on the USD/CNH daily chart, and whilst its next directional move is a little tricky to anticipate – it suggests we could be approaching a burst of volatility. With that said, prices are within an established uptrend on the daily chart and Friday’s bullish hammer just above the 50-day EMA has me on the lookout for a break higher
- The China A50 formed a bearish hammer on Friday, but given we saw a strong bullish engulfing candle rally form the 200-day EMA on Thursday, pullbacks within Thursday’s range could present another long opportunity for bulls
- WTI crude oil rose to a 4-month high on Friday, stopping just short of testing its YTD high set on 12th April. It’s plausible to expect prices to consolidate or retrace from the milestone level, but if US dollar weakness persists then we could be looking at a breakout sooner than later.
ASX 200 at a glance:
- The ASX 200 formed a 2-bar bearish reversal pattern called a dark cloud cover, with two false break above 7400
- However, a small bullish candle formed on Friday with a double bottom around 7280
- SPI futures were -0.15% lower, but there are tentative signs of some stability following two heavy days of selling on Wednesday and Thursday
- Intraday support levels: 7200, 7240, 7260, 7290
- Intraday resistance levels: 7357, 7370, 7400
Gold 1-hour chart:
Gold prices were lower for a second week, and bearish momentum accelerated to deliver the anticipated retracement following two spinning top dojis on the weekly chart. But with the US dollar index seemingly on a retracement of its own, gold may have formed an important swing low on Friday.
Gold formed a bullish engulfing day with a lower wick forming just above 1925, a level which provided resistance around the end of June and beginning of July. The 1-hour chart shows gold also formed a strong bullish engulfing candle at the low alongside heavy volume to show demand above 1930. and prices are now consolidating in a tight range near Friday’s highs. The consolidation prior to the break higher had a lot of trading activity around 1935, making it a potential level of support should prices retrace. But if prices continue higher form the consolidation, an initial move to 1955 – 1958 seems feasible, a break above which brings 1970 into focus.
AUD/USD daily chart:
AUD/USD fell for a thirds week and closed around the March low. Yet we saw a failed break of this level back in March, and with the US dollar index (DXY) now retracing, it leaves the potential for another move higher on AUD/USD (especially if appetite for risk is restored).
However, whilst AUD/USD rose for a second consecutive day on Friday, a bearish hammer shows the Aussie is hesitant to break back above 0.6600 – a level which seems pivotal over the near-term. And suggests a move to 0.6500 or the YTD low at 0.6458 could be on the cards whilst prices remain below 66c.
Either way, I’ll be keeping a close eye on how AUD/USD behaves around the 66c level as it could be the difference between a countertrend rally or another leg lower.
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