The New York Stock Exchange

Equity markets in Asia are lower even though the Bank of Japan (BoJ) embarked on its first fixed-rate bond purchase in five months.

The Japanese central bank pushed government bond yields lower to keep them in line with their policy. A more hawkish stance from central banks in The West has pushed up the yield of government bonds around the world.

The eurozone has been enjoyed a spell of positive economic data recently and policymakers at the European Central Bank (ECB) even considered dropping the pledge to keep buying government bonds, it has emerged. The ECB choose to keep that statement in their latest update, but the very fact that it was up for debate tells us what direction the policy is heading it. The very aggressive easing policy has certainly assisted the economic health of the region, but it also pushed up equity markets. Now central bankers are thinking about moving away from an easing bias, it has prompted traders to cash in their positions.

Oil initially surged after the energy information agency (EIA) reported a 6.3 million barrel draw in oil inventories, and traders were anticipating a draw of 2.3 million barrels. The gains were given up after a few hours and oil dropped to a new low of the day yesterday. The American Petroleum Institute (API) announced a much bigger than expected drop in inventories on Wednesday – so the EIA report wasn’t a total shock. Even though US stockpiles of oil are at its lowest level since January, the concerns about global over-supply are still doing the rounds. 

The US released some underwhelming jobs data yesterday. The ADP private employment report came in at 158,000, and economists were expecting 185,000, and the previous month’s reading was 258,000. The initial jobless claims came in at 248,000, and the consensus was for 243,000. The disappointing numbers have set the tone for the non-farm payrolls report. Broadly speaking, the US economy needs to add 200,000 jobs per month to ensure the recovery keeps progressing.

The non-farm payroll report at 1.30pm will be the highlight of the trading session, and the consensus is for a 179,000 jobs to have been added in June. The unemployment rate is tipped to remain at 4.3%, and average earnings is anticipated to rise from 0.2% to 0.3% on a month on month basis.

As there are several jobs related economic indicators announced at the same time, it is important to digest all the numbers. There can often be a knee-jerk reaction to the headline number, but keep an eye out for revisions, the unemployment percentage and wages figures. The Federal Reserve made it clear they are more interested in economic growth rather than inflation. Without solid employment numbers decent growth will be difficult to achieve.

Forex snapshot

EUR/USD – 1.1400 is acting as support, and if it holds the resistance at 1.1495 will be the next price to watch A drop back below 1.1400 could see it return to 1.1300.

GBP/USD – is receiving support at 1.2876 – the 50-day moving average. If the support holds, bulls will be looking to 1.2977, 1.3000 and 1.3047. A break below 1.2876 could bring the support at 1.2800 into play.

EUR/GBP – 0.8770 is providing support, and if it holds the resistance at 0.8844 and 0.8880 will be the upside targets. A break below 0.8770 will bring the support at 0.8738 into play.

USD/JPY – 113.00 is acting as support, and bulls will be looking to the resistance at 114.36. A sizeable move below 113.00 will bring the 100-day moving average at 111.81 into play, and the next support level will be the 200-day moving average at 111.50.

 

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.