Primus Weekly - 7th December

Hi Everyone,

Non-farm payroll data disappointed last week with only 245,000 new jobs added in November vs the expectation of 469,000. The slowdown compared to last month was remarkable – we saw 610,000 new jobs added in October.

Also, the trend since June, when we saw 4.78 million jobs added, has been clear – the pace of jobs recovery is slowing. In July 1.76 million jobs were added, 1.49 million in August, and 710k in September. Nonfarm payrolls have recovered from April lows to recoup around 12.3 million jobs, around 56% of the 22.2 million that were lost during the initial COVID-19 crisis in the U.S. Whilst the recovery has been the fastest on record, there are still around 10 million people out of work. Unemployment rate is standing at 6.7%, down from 6.9% in October, but given the drop in labor force participation of around 400,000 people to 61.5%, the real unemployment remains unchanged. The numbers are not encouraging, especially given the massive amounts of stimulus coming out of the Fed and the federal government. People out of work act as a drag for the economy for 2 reasons – namely, they require unemployment benefits that have to be paid for by the state or the federal government. Secondly, the longer people are out of work, the less employable they become. The latter then becomes a supply side issue for the economy as there are less employable people available. The Congress is expected to vote on a new US$ 908 billion stimulus bill this week that has an allocation of around US$ 300 billion for employment benefits. The markets are likely to turn sentiment in the event this bill does not get approved, as has already happened a couple of times prior to the Elections.

The ECB is meeting this coming Thursday and is almost certain to expand their asset-purchasing program. A number of ECB officials have expressed their concern about sharper than expected slowdowns in growth momentum and weakening in fundamentals. Also, European Union leaders are voting on additional EUR 750 billion fund aimed to support countries struggling with COVID-19 related costs. A list of European member states has imposed lockdown measures and restrictions on movement due to the second coronavirus wave. The ECB seems to have learned from 2008 crisis when austerity was a key criterion in order to get access to the stimulus funds – ECM President Christine Lagarde has been emphasizing the need for favorable financing conditions. This means record-low levels of interest rates of -0.5%, in the absence of any meaningful inflation in Europe, are here to stay. European economy has been one with the hardest hit during 2020 crisis and the aggregate output is not expected to recover before 2023, while the U.S. is expected to reach the same level next year, and China is anticipated to grow the national output by 4.3% this year. EURUSD is currently trading at a swing high of 1.2177, up 1.33% last week.

Equity markets continue to carry the positive momentum as S&P500 hit another all-time-high last week, closing 3,699.2, up +2.25%. Nasdaq100 hit all-time-high of 12,538.92, up 2.31%. Gold has recovered some of the losses, closing the week near 1,841.52, up 3.2%. US dollar, measured by DXY, is still showing weakness, trading now at 90.76.

Have a great trading week ahead!

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In The Spotlight

 

DateCurrencyEventPrevious Consensus 
TuesdayJPYGross Domestic Product QoQ5.0%5.0%
TuesdayEUREuro Area Gross Domestic Product QoQ12.7%12.6%
WednesdayUSDJOLTS Job Openings6.44 *
Thursday – FridayEUREuropean Council Meeting
ThursdayEURECB Interest Rate Decision0.0%0.0%
ThursdayUSDInitial Jobless Claims0.71 *
ThursdayUSDCPI, ex Food and Energy1.6%1.8%

*In USD millions

Impact

  • JPY GDP growth

GDP data shows the monetary value of all the goods and services produced in Japan. A negative number indicates a contraction of economic activity while a positive number shows an expansion. A better than expected growth is generally positive for JPY, whilst a print below expectations tends to be negative.

  • Initial Jobless Claims

Initial Jobless Claims have started to increase again, failing to meet the consensus expectations. Lower than expected claims are generally bullish for USD, while higher than expected are bearish.

Market Sentiment

EURUSD has hit another swing high of 1.2177 as it continues its rise. The pair has been carried higher by bullish momentum with short- and long-term Moving Averages stacked (8 > 21 > 34 > 50 > 100 > 200). The trend continues to be positive with DMI+ currently at 30.6 levels and rising, and ADX near 25.2 pointing higher. Looking at the Stochastic of 84.8 and RSI of 72.1 which both point to overbought levels, we may see some pullback. Also, the price broke the upper Bollinger Band level last week but was forced back to the range during Monday trading session. Intraday high of 1.2177 acts as short-term resistance, while 8-day Moving Average of 1.2057 supports the price.

Support: 1.2057
Resistance: 1.2177

The pair briefly broke the resistance of 1.3500 during intraday trading session last week, touching 1.3539 levels before retreating to 1.3370. The pair has been supported by 8-day Moving Average which is currently near 1.3373. Moving Averages are stacked in a bullish manner and continue to support positive momentum. The strength of the trend is very strong as ADX is 31.2 and DMI+ 23.3. Stochastic of 56.7 and RSI of 58.3 are both neutral.

Support: 1.3373

Resistance: 1.3500

The pair has been consolidating and trading near 104.10 levels. Moving Averages are stacked in a bearish manner but there is little energy left in the trend as DMIs are near 19.0 and ADX is fallen to 13.0 levels. RSI and Stochastic are both neutral and respectively 45.6 and 34.1.

Support: 103.15

Resistance: 104.32

After a 4-month range-bound trading USDCHF has sank to another low of 0.8885, breaking lower Bollinger Band resistance near 0.8915. The momentum has picked up last week as ADX is now 22.6 and rising, while DMI- is 31.5. RSI is borderline neutral at 30.3 and Stochastic oversold near 11.2

Support: 0.8885

Resistance: 0.8973

Kaia Parv, CFA, is an experienced Portfolio and Investment Manager with exposure to both public and private markets. Before joining FXPRIMUS, Kaia was a Senior Investment Associate at EFA Group and a Vice President in Bank of America Merrill Lynch.

Any opinions, news, research, analyses, prices or other information contained here are provided as general market commentary and do not constitute investment advice. FXPRIMUS does not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

Risk Warning: Trading on margin products involves a high level of risk , which may result in the loss of all invested capital.

Risk Warning: Trading on margin products involves a high level of risk , which may result in the loss of all invested capital.

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Risk Warning: Trading on margin products involves a high level of risk , which may result in the loss of all invested capital.

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