SPECIAL REPORT: US NFP Is Here, Are You Ready?


Global markets are roaring and the US NFP data is here. The question is if this momentum can last?



 
The Strongest Index
There is no doubt that the global equity markets have had a stellar start in the new year. No matter where you look, you see solid gains. Just to put things in perspective, the S&P500 index hasn’t had such a strong January since 1989. It is up a whopping 7.87% year-to-date. Similarly, the NASDAQ index is up 9.74% and the Dow Jones index is up nearly 7.17%. But the index that leads the race is the Istanbul index, up over 14% mainly due to the stable political landscape after years of instability. The best performing sectors are communication services, consumer discretionary, energy and financials.  
 
US NFP Day Is Here
Today is the day for the most important piece of economic data: the US Non-Farm-Payroll number. Without any doubt, it is the most important economic number of the month and it sets the tone for trading for the rest of the month. The forecast for the headline number, the Non-Farm employment change, is 165K while the previous reading was 312K. The average hourly earnings number is expected to soften a little. The forecast for this is 0.3% versus the previous reading of 0.4%. The US ADP number usually sets the tone for the US NFP number and the reading for January shows that the labour market is still robust in the midst of the US government shutdown. If today’s number confirms the same statement, it is likely that the markets will see that as a positive sign. At the same time, it will be balanced by the fact that good news is not necessarily good, because the Fed could change its stance towards the monetary policy.   
 
Bulls To Come Back With Vengeance, But Not Yet
If anyone is happy by the current Fed stance, it is the dollar index bear group. They have been beaten down badly since June 2018 and it is only now that the dollar index price has broken out of the upward channel for the first time. I think the trend for the next two quarters is going to remain similar because the Fed is in no rush to change their stance, and every single month, they are going to continue the same mantra. Of course, the word which matters the most for markets or for the bulls is “patient” and the moment this word disappears from the Fed comments, I think the bulls will come back with vengeance.


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Gold Holdings At Highest Level Since 2013
As a rule of thumb, any weakness in the dollar index is good news for the gold bulls. Having said this, the dollar and the gold index are not strongly correlated as comparing the two charts shows. But the fact is that there is a correlation between the two and the gold price is literally on the tear because of the strong momentum behind it. Even if one looks at the gold holdings, shown in the lower panel of the chart below, they have surged to the highest level since 2013. This confirms that the momentum is here to stay because it is backed by actual demand.


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