Today’s weaker-than-expected US non-farm jobs report has kept the ongoing reflation trade alive, with investor concerns about inflation and tapering being put on the back burner for now.
The US economy added +559K jobs vs +675K expected. Though there was a slight upward revision to the previous month’s reading, the overall total was nothing close to the 1 million many had feared would raise tightening concerns. In addition, the sightly drop in the unemployment rate was due to the fall in the participation rate. Overall, not nearly as strong a jobs report as the markets were anticipating.
The net result was the immediate liquidation of the long dollar positions accumulated during Thursday’s rally. The EUR/USD, GBP/USD and gold etc. all rose as, while the USD/JPY dropped.
The weaker data means the goldilocks scenario for the equity markets have been kept intact. US index futures jumped on the back of data, as investors have pushed their expectations about the Fed tapering its bond buying further out.
Here is some of the key numbers courtesy of FOREX Live:
- NFP +559K vs +675K expected
- Prior was 266K (revised to 278K)
- Unemployment rate 5.8% vs 5.9% expected
- Prior unemployment rate 6.1%
- Participation rate 61.6% vs 61.8% expected (was 62.8% pre-pandemic)
- Prior participation rate 61.7%
- Underemployment rate 10.2% vs 10.4% prior
- Average hourly earnings +0.5% m/m vs +0.2% expected
- Average hourly earnings +2.0% y/y vs +1.6% expected
- Average weekly hours 34.9 vs 34.9 expected
- Two month net revision +27K
- Change in private payrolls +492K vs +610K expected
- Change in manufacturing payrolls +23K vs +25K expected
reclaims 21-day exponential average and bullish trend remains intact:
Source: ThinkMarkets and TradingView.com
If the metal can now rise back above Wednesday’s low, the point of origin of Thursday’s drop, then we could see the onset of a sharp short-squeeze rally towards the 61.5% Fibonacci level at $1923 next.
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