The positive trend in the US labour market continued in March with 916k new hirings and January and February numbers being revised up by 156K. This was 264K more than analysts expected and the biggest increase in the number of new jobs since the beginning of Q4 2020. The jobless rate decreased by 0.2% to 6.00% and the average earnings missed the expectations by 0.2% coming in at -0.1%. By reading further you agree with our disclaimer at the bottom of this page and acknowledge that we do not provide investment advice.
Market reactions to NFP numbers were mooted as the outcome was already priced in and the market participants are likely focusing on President Biden’s massive government infrastructure spending package. Overall the US stock indices have remained positive just as we expected. DJIA and SP 500 have been much more bullish than Nasdaq that has been slowed down by the rise in the treasury yields. Also, the expectations that the pandemic will sooner or later be under control with the help of vaccinations have caused outflows from the so-called stay at home stocks. At the same time, gold is forming a potential double bottom in the daily timeframe. Higher lows in USOIL daily chart indicate pressure is building against the resistance we identified (here). Last week EURUSD reached our target area around the 38.2% Fibonacci retracement and USDJPY kept on rallying as expected. For more details on these successful analyses visit TIOmarkets.com/analysis and our YouTube channel.
This week’s key risk events include the RBA rate decision tomorrow the FOMC meeting minutes on Wednesday. On Thursday we will focus on Fed Chair Powell’s speech and on Friday the Canadian employment reports take the centre role. For more details on macroeconomic releases see our economic calendar.
In the last Bullish and Bearish Markets video, we pointed to the 31862 – 32079 as a key support zone for DJ (Dow Jones Industrial Average CFD). Price retraced to it and bounced higher exactly from the zone providing TIOmarkets clients with a superb long trade opportunity. DJ is now trading some 3.8% higher. DJIA index has been more bullish than the other major indices in the US as rising yields have converted flows from technology stocks to more traditional business that will benefit from vaccinations and the improving economy.
President Biden’s massive infrastructure spending is another factor at play here as government spending supports industrial companies in the long term. At the same time, as the economy opens up bit by bit the demand for services and products is expected to increase substantially. The third factor explaining the good performance of DJIA is that the inflation fears are driving money into stocks in general. These factors are not likely to disappear any time soon. The key price levels in DJIA this week are 33229.50, 32066.50.
The price of gold is forming a double bottom in the daily chart at the support zone we have focused on since early February. It was then that we designated the 1671 – 1692 zone as a highly significant support zone and now the price action has proved that the institutional investors agreed with our analysis.
There is a wedge formation that gold is also trying to break out of. A projection based on its width suggests the price of gold could move as high as 1875.10. However, before this can happen we need to see a continued commitment from the bulls. The next most important hurdle is the resistance area around 1764. To see increase the likelihood of this happening it would be beneficial to see further declines in the US Treasury yields. We have been saying for some time now that the yields have risen so much lately that we don’t expect they could move much higher. Therefore, a correction lower (in yields) could be in the cards. This would be bullish for gold. In a more bearish (but less likely) scenario, the price could break the 1676.80 support and move considerably lower. The key price levels in gold this week are 1676.80 and 1848.20.
Since our analysis on March 8th, the price of oil has been quite weak. We highlighted then that the price has run too far too fast and suggested a correction would be likely. USOIL has since traded over 11% lower before short-covering started. The buyers stepped in around our support zone and the latest lows were only 1.6% below our zone. This suggests bullishness coming into the oil markets as the vaccination programs advance. There are, however, fundamental risk factors that could negate these early signs of bullishness. OPEC+ agreed last week that they will increase production in May to July period. This has kept the lid on the market and our resistance zone has held.
In the latest Bullish and Bearish Markets video (here) we identified the 62.00 region as a likely resistance level. Now the price has been making higher lows and thus creating pressure against this resistance However, the OPEC+ decision on production hikes certainly means we have to be careful and only trade what we see (not what we anticipate). We take a neutral view on this market now and wait for further price action to give us a better understanding of the likely future moves. Open a VIP Black account with us. There are no per trade execution or monthly fees on our VIP Black accounts.
If the rising support (red line) holds and higher lows are created then it is likely the resistance zone will be tested again but a break below it would indicate the bears are in charge and a break below 57.22 would become more likely. Above the 62.00 dollar level, we have another key price point at 63.10. This former support could now be a resistance. The key price levels in USOIL this week are 57.22, 62.00, 63.10 and 66.42.
EURUSD has fallen quite a bit since the beginning of the year and is now in the oversold zone as per the Stochastic oscillator (5.3.3). We said earlier that if the 1.1835 support breaks we should the pair to move to is 1.1600 – 1.1694 range. Since then the lowest low (1.1704) has been only 7 pips away from this range and we have seen a two-day rally from the area. This shows that other market participants are seeing this zone as important. The downtrend isn’t yet over, however, and the price needs to close decisively above 1.1787 in order to stage a more sustainable rally.
Some consolidation above last week’s low (1.1704) combined with a break above 1.1787 would mean we have a trend reversal in place and the market could rally higher. It is worth monitoring the EURUSD price action this week to see if the early indications of momentum loss develop into a consolidation or trend reversal. Alternatively, if the 1.1704 support breaks the next support level to focus on is the 1.1603 low. The key price levels in EURUSD for this week are 1.1603, 1.1704, 1.1835 and 1.1990. Open a VIP Black account with us. There are no per trade execution or monthly fees on our VIP Black accounts.
A higher weekly low put in place in GBPUSD last week indicates that the resistance zone the pair is trading is likely to break. However, the loss of momentum candle from Friday is an indication of indecision and we want to see the cable successfully defending the levels around 1.3844 before turning bullish. This is a level where we have both 20 and 50-period SMAs converging and a daily high from March 29th. If this happened then a move to 1.3950 – 1.4020 would be made possible. A failure to stay above the level would likely bring a support level at 1.3670 to play. The key price levels for this week in GBPUSD are 1.3674, 1.3844 and 1.4000.
You may access the times and dates in the economic calendar here.
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Chief Market Analyst
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