Today's Market Insights

Reminders

Exercise extra caution when trading currencies during weeks with scheduled news or data releases. It's advisable to either stay away from trading or reduce risk exposure on days when significant news is expected. Data can often be unpredictable, even for economists closely following expectations set by the country releasing the data.

Market Overview

Last week's release of employment change and earnings showed support for a hawkish outlook for the FED, delaying rate cut expectations. Average hourly earnings m/m showed 0.4%, a ten basis points increase, while Non-farm Employment Change showed an increase of 272k from 165k of the previous month, dwarfing even expectations. Although the unemployment rate rose by ten basis points to 4%, the other data released gave confidence to investors towards the U.S. economy. 

Following the data release, the dollar rose last Friday before the market closed, gaining back losses against its peers. 

Wall Street finished in the red. The S&P 500 fell 0.1% after hitting an all-time high of 5,375.08 points. The Dow Jones Industrial Average edged down 0.2%, and the Nasdaq Composite also lost 0.2%.

The benchmark 10-year U.S. Treasury yield, a benchmark for borrowing rates globally, leaped over 15 basis points after the jobs report, to 4.4335%, its biggest one-day jump in about two months. The two-year yield, which tracks interest rate expectations, climbed nearly 17 basis points to 4.8868%, following six straight days of declines until Thursday. Bond yields rise as prices fall.

This week will be noisy for the U.S. as CPI and PPI come out alongside the FOMC press conference. The following data will resolve a huge part toward rate cut expectations, but the labor market is out of the window as strong data showed no crack.

As the data continues to be unpredictable, we stick to FED statements for our expectations and wait for further confirmation before calling any movements for any currency direction paired with the dollar.

The news will be followed through by data from the United Kingdom as Claimant Count Change and GDP m/m will be released. For Canada, the BOC Gov. Macklem delivers his speech -- an opportunity for traders to look for clues toward rate expectations. We also have employment changes coming from Australia, and the BOJ will deliver its monetary policy statement that will play a pivotal role in Yen's expectations. 

GOLD -The market took a huge blow after the U.S. data release, which boosted investor confidence due to a strong labor market. The increase in yields has made it difficult for the metals market, causing a decline in gold prices. Chart-wise, we can see the market forming a Head and Shoulders (SHS) pattern, leading us to expect further declines. A break below 2295.536, followed by a push below 2261.156, will allow us to fully shift our expectations. However, this week's data releases will play a significant role in shaping market expectations for gold. The COT report shows a weakening bullish sentiment among investors, while the number of bears is also decreasing, though to a lesser extent.

SILVER - Silver has formed an M pattern, indicating potential for the market to push lower. If the price breaks below 29.018, we can expect it to fall further. As long as prices continue to trade below 29.900, breaking through this structure seems likely. However, like gold, silver trades will also be influenced by upcoming data releases.

DXY -While the dollar remains in an overall downtrend, the DXY is forming a potential double bottom, indicating a strengthening in the market. A break above 105.071 will increase bullish expectations for the dollar, causing its peers to lose value against the greenback. It is advisable to wait for the FOMC statement and PPI release before trading any USD pairs to allow for more clarity.

GBPUSD -The market showed a decline after the data release, causing the pound to lose value against the dollar. This was within expectations, as the upper boundary of the range at 1.27938 held prices down. While we anticipated the rise to continue, with prices showing commitment to creating new higher highs and higher lows to break out of the range, the hawkish outlook toward the Fed is not supportive of this increase in prices.

AUDUSD - The market has failed to reach the key structure at 0.67142 and has broken below 0.65869. It is showing a potential M formation, and its completion would indicate a move to lower prices. We may see some resistance around 0.65250.

NZDUSD -After breaking through the key structure at 0.61987, the price failed to trade beyond 0.62086, falling short of bullish expectations. It then dropped to trade between 0.61408 and 0.60954, favoring bearish momentum. The price is now close to testing 0.60954 with strong downward momentum.

EURUSD -The EUR failed to meet bullish expectations after falling below 1.08543. As the market opened with a gap at 1.07637, we can observe strong bearish sentiment. Chart-wise, the market appears to be preparing for the completion of the M pattern.

USDJPY - After the Yen recovered against the dollar, it lost more than half its gains following the data release. While there is a potential W formation, the market's direction remains uncertain due to the Bank of Japan's active role in controlling currency interest rates. The price is currently trading above 156.516, after failing to break below 154.658.

USDCHF - After the market crashed below 0.90054, it was held up by the key structure at 0.88886 and is now trading back toward 0.90054. We will wait and see how the price moves, but we assume consolidated market conditions for the time being.

USDCAD - The CAD weakness is evident as the BoC cut rates, allowing the dollar to dominate in this market. The price has consistently found support at 1.36052 and is now above 1.37435, trading toward 1.37881.

COT Reports Analysis

CAD - Weak (5/5)

CHF - Weak (3/5)

GBP - Strong (5/5)

JPY - Strong (2/5)

EUR - Strong (5/5)

AUD - Weak (3/5)

NZD - Strong (5/5)

USD - Strong (3/5)

GOLD - Strong (2/5)

Silver - Strong (2/5)