Did you think the Europe and the US’ paths may be diverging soon? Think again! Friday’s Non-Farm payrolls headline number showed that the US labor market slowdown is far from being over.
Economists were expecting 230,000 jobs created in August, but were disappointingly given a reading of 142,000. The number, an eight month low, was a bit of a blow for markets, but was cushioned by the fact that it still managed to reduce headline unemployment to 6.1% from 6.2% and wage growth still remained just about 2% – something the UK can only dream of right now.
The reaction in currency markets was short-lived, as investors sold the dollar very briefly before buying it back and returning to the post ECB status.
Meanwhile, Friday also saw a ceasefire in Eastern Ukraine, which looked shaky over the weekend, but has officially still held. The reaction was positive to start with and the Euro saw some strength on the introduction of the ceasefire, but that could be undone if the skirmishes (reportedly from both sides) continue.
Europe has hit Russia once again with sanctions, this time by increasing the number of companies on its sanctions list. Three Russian oil companies have been banned from raising funds of any term longer than 30 days – which gives them a cash-flow lifeline, but severely limits their refinancing and expansion capabilities. On top of this, Russian banks who were prevented from raising funds for longer than 90 days, back in July, will have this reduced to 30 days as well. With ordinary Russians already feeling the pinch from sanctions, perhaps these increases will start to reach Putin’s inner circle.
Sunday night was a big one for Mr. British Pound. The Pound was hit hard on market opening after two polls were published on the Scottish independence referendum. For the first time, one poll showed the Yes campaign in the lead, while the second showed them just four points behind.
From Australia, we heard from a well respected economist who has called on the Reserve Bank of Australia not to revolve monetary policy around the housing markets in Sydney and Melbourne. Ross Gamaut says that the RBA needs to use other tools to control house price rises and then cut the interest rate to help bring down the exchange rate, saying “we needed a lower real exchange rate 18 months ago”.
Looking ahead to the calendar this week; after last week’s storm of heavy data, we start the week with a more subdued run. UK retail sales, industrial output and trade balance, followed by Mark Carney at the Treasury Select Committee will be the highlights for the first half of the week. Thursday and Friday see a little bit of attention on the US, with more jobless numbers, the Federal Budget numbers from August and, on Friday, retail sales data to round off the week.
So far Asian markets have provided no real direction and futures are leaning only very slightly towards markets opening lower as Europe starts the week. Watch for more data on the Scottish referendum as the overriding factor in the fate of the Pound.
Intraday Forex Technical Levels
EUR/USD 4-hour: Consolidating.
Invest Diva likes: Short positions below 1.2950 with targets at 1.2900 and 1.2840 in extension.
If pair goes nuts: Above 1.2950 look for further upside with 1.3020 and 1.3112 as targets.
What’s up on the forex dance floor: The pair is on overall downtrend and currently consolidating around the support level at 1.2950. The RSI is still in the oversold zone but teasing its upper boundary.
Supports and resistances
1.2950 Pivot point
USD/JPY 4-hour: Moving up.
Invest Diva Likes: Long positions above 105.00 with targets at 105.37 and 105.50 in extension.
If Pair Goes Nuts: Below 105.37 look for further downside towards 105.00 and 104.79.
What’s up on the Forex Dance Floor: The pair is on an overall uptrend. It failed to break down the support level at 104.75 and to form the double top pattern we mentioned last week. The RSI is above the neutrality area.
Supports and Resistances
105.37 Pivot point
USD/CAD 4-hour: Moving up.
Invest Diva Likes: Long positions above 1.9020 with targets at 1.0935 and 1.0990 in extension.
If Pair Goes Nuts: Below 1.9020 look for further downside towards 1.0861 and 1.0843.
What’s up on the Forex Dance Floor: The pair is moving within the Ichimoku’s cloud and now teasing its upper boundary. The RSI is around the neutrality area.
Supports and Resistances
1.0902 Pivot Point