market relief

US equity markets had a strong finish last week, as the Dow Jones, S&P 500 and NASDAQ closed at record highs.

The non-farm payrolls report on Friday was very middle of the road. In October, the US added 261,000 jobs and the consensus was for 310,000. The September figure was revised from a decline of 33,000 to a creation of 18,000. Averaged over the past two months, the US added 139,500 jobs each month – which is low when compared with summer months. Unemployment continued to grind lower, and it now stands at 4.1%. The deceleration of average earnings was the most worrying part of the jobs report. On a month-on-month basis, there was zero growth - down from 0.5%. On an annual basis, it 2.4%, down from 2.8%.If the US economy want to keep ticking along, it will need to see a return to higher wage growth, as spending by Americans is crucial to a strong economy. 

Today, Spain, Italy, France and Germany will reveal the final reading of the services PMI reports. Keep in mind that manufacturing figures from the eurozone were robust last week. The single currency has been weakened by the European Central Bank (ECB) as they have left the door open to a round of quantitative easing. Mario Draghi, the President of the ECB will be speaking in Frankfurt at 9am (UK time). Mr Draghi has form when it comes to talking down the currency

Carles Puigedemont, the ex-President of Catalonia has handed himself in to Belgian police. The ball is in Madrid’s court, and should the Spanish government come down too heavy on the Catalan politicians, they could spur on separatist sentiment.  The last thing investors will want to see is violent clashes between the police and supporter of an independent Catalonia. If the situation is handled in a clam and peaceful manner, it is likely to lead to low volatility in the IBEX 35.

Janet Yellen, the Federal Reserve Chair is due to give a talk at 7pm (UK time). Ms Yellen is going to be preplaced by Jerome Powell. The shake-up at the US central bank continues, as William Dudley of the New York Fed is tipped to announce his retirement.  

EUR/USD – remains below the 100-day moving average at 1.1700, and if it holds below that level it could send the market to the 1.1574. The 50-day moving average at 1.1818 could act as resistance to rallies.

GBP/USD – is still in its upward trend and while it is above the 1.3000 mark, the outlook may remain positive. Rallies may incur resistance at 1.3335. A break below 1.3000 could send it to 1.2900.

EUR/GBP – is eyeing the 50-day moving average at 0.8940, and a break above it might put 0.9049 on the radar. Moves lower could find support at 0.8733.

USD/JPY – has been pushing higher since early September, and the July high of 114.49 could be the next level to watch. A break above 114.49, might see the market target 115.62 and support may come into play at 113.00. The next support level below that could be the 200-day moving average at 111.74.

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