Pre-Market Analysis and Chartbook: Dollar Bounces Back on Strong Payrolls

Friday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,720 -0.50%
DAX 30 11,543 0.65%
WTI Crude Oil 63.27 -0.45%
GOLD 1,233 -0.15%
Bitcoin 6,362 0.33%
EUR/USD 1.1377 -0.27%

The US Employment Report stole the show today in financial markets, as usual on Jobs Fridays, and the Dollar got a meaningful boost from the strong payrolls number. Stocks pulled back and treasury yields exploded higher after the release, and that rocketed the Greenback towards its recent highs again, despite the 10-day low in the Dollar Index during the European session.

EUR/USD, 4-Hour Chart Analysis

The EUR/USD first hit the target for the correction at 1.440 than plunged back below the 1.14 level after the Employment Report, clearly keeping the long-term downtrend intact. While hourly earnings didn’t surprise the market, coming in at 0.2% the 250,000 payrolls added were enough to lift the reserve currency before next week’s Fed meeting.

Although the Fed is not expected to hike rates this time around, the recent economic numbers remained robust in the US, and as Europe slowed down, the strong divergence between Wall Street the Dollar and the rest of the world could remain dominant even in light of the loose US fiscal policies.

S&P 500 Futures, 4-Hour Chart Analysis

Stocks turned sharply lower after opening in the green on Wall Street amid the broad Dollar rally, and as a Chinese official cooled hopes of an imminent trade deal with the US. The past three days saw the strongest equity rally in more than a month, but the extent of the recent drop, together with the under-the-hood weakness makes the bounce suspicious and we remain defensive towards stocks for the coming weeks.

Pound Pulls Back as Oil Remains Weak on Growth Concerns

GBP/USD, 4-Hour Chart Analysis

The GBP/USD pair also reached the 1.3050 resistance level, which seemed like a likely correction target, and although the Cable is in a short-term uptrend, a break-out in the Dollar index combined with a new low in the EUR/USD could put a lot of pressure on the Pound as well. That said, favorable Brexit-related news could set up a higher swing low, which in turn could provide a short-term buy signal in the pair, despite the still bearish long-term pressures.

WTI Crude Oil, 4-Hour Chart Analysis

While copper extended yesterday’s rally thanks to the strength in Chinese markets, gold and oil are down today due to the dollar’s rally. While the better-than-expected US factory orders helped sentiment in the commodity space, crude oil remains very weak from a short.-term perspective, with the Saudi’s promised output increase and global growth worries putting the Black Gold under selling pressure.

The commodity plunged below $65 after a brief correction as we expected, and now it is trading near the $63 support, the lowest level since April, with all eyes on the massive support/resistance zone in the $58-$60 area, which could serve as a base for a bounce in the coming period.

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Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.