U.S. stocks fell on Thursday after stronger than expected ADP jobs report. Investors remain cautious about the FED’s future monetary policy as more tightening could be on the way, especially after yesterday’s surprise in the labor market figures.
All three major indexes are headed to a negative close this week. The Dow slid 1.07%, the S&P500 dropped 0.79% while the Nasdaq composite lost 0.82%. It is important to note that yesterday’s drop in the Dow and S&P500 was the worst daily performance since May. Therefore, we can see how the market has become very sensitive to economic releases as uncertainty looms. The ADP data that shows the change in private sector jobs rose by 497,000 in June, while expectations were pointing to 226,000 new jobs only. This is more than double the consensus and the biggest monthly advance since July of last year. In addition, unemployment claims came out at 248K.
In the FX Market, the U.S. Dollar benefited from strong employment data and managed to post strong gains against a basket of major currencies. Meanwhile, gold confirmed the negative technical outlook mentioned in our previous report as the yellow metal found strong sellers below the 1930-1937 hourly resistance zone. In addition, the decline took out the short-term support of 1910 before reaching a low of $1902.80 per ounce. As of now, the bearish pressure remains intact, however, the focus will be on the Non-Farm payrolls later today. The weekly close will be key for future price action in gold as buyers are likely to try to preserve prices above the 1900 psychological support which can lead to sideways trading.
To summarize, we will be waiting for a breakdown below the 1900 support to confirm another wave lower in the direction of the 1885-1870 zone. On the flip side, a daily close above the 1932-1937 zone is needed to talk about a potential bullish reversal in the near term which can push prices back to the 1955 resistance.
On the other side, oil faced increased volatility after the release of the latest crude oil inventories which showed a decline of -1.5M barrels. From a wider angle, prices of WTI crude are trading sideways when looking at the daily chart, the range is located between the $75.00 resistance and the $67.00 support. Therefore, only a break outside of this band will likely give more guidance about the next directional move. In the near term, the key support is seen at the 70.25 level while important resistance stands at the 72.60 level.
As of today, the focus will be on the U.S. non-farm payrolls which are expected to have declined from 339K to 224K. Investors are also waiting for the average hourly earnings which are likely to remain unchanged at 0.3%. Finally, the unemployment rate is due to fall from 3.7% to 3.6%.
Economic Analyst
Amine Hiani