The NFP data came out with mixed signals today, but the bond market saw the positive inflation narrative pushing further higher with expectations the Fed will raise by 50bps regardless that the headline figure missed expectations.
A lot has been made of the US benchmark yield curves recently. With analysts giving guidance that in 18-months’ time we should be seeing the US fall into a recession. Over the course of history, the inversion of the short-term yields over the 10-30 year yields signals that the future looks bleak according to the bond market with disruptions to be expected. Other market participants are highlighting the fact that the stock market usually rallies on the inversion, so for day traders and swing traders we should be on the lookout for that. If the inversion lasts for a full quarter, larger money managers will no doubt become more defensive.
Last month the US unemployment rate fell 0.2 percentage points to 3.6%, from 3.8% in February. The highly anticipated Non-farm payrolls rose by 431,000 according to today’s report by the Bureau of Labour Statistics and as this figure came in under expectations we’ve seen a sell-off in risk assets like the US equities. The US dollar did catch a bid and may be due to the net two-month revisions which show an additional 95k jobs being added. US average earnings for March ticked up slightly YoY above expectations and came in at 5.6% though the average hourly hours worked slightly ticked down.
The S&P500 is dragging the rest of the US equities lower and would appear to be correcting the bear market rally. There is little support until we get to just below 4300, so it will be interesting to see how far they push this price action down.
In the latest jobs report, Biden said the US economy is no longer "on the mend," but rather "on the move." However, he stressed that more needs to be done to "get prices under control," especially considering Russia's "invasion of Ukraine."
The manufacturing sector in the United States continued to expand in March, but it fell to its lowest level since September 2020. Manufacturing Purchasing Managers' Index was 57.1%, down 1.5 percentage points from February and lower than expectations. Add this to the recent manufacturing data out of China and we have the world’s two largest economies struggling to keep manufacturing trending higher. If output should start to contract over the course of a few months, we could be in for more supply shocks in the latter stages of the year.
The EURUSD is finding support currently at the daily 200-period EMA with a test of the 1.1000 and the 27th of March highs also a good target.
The ActivTrades sentiment indicator for the USDJPY is running extremely biased towards the short side. This trade is very crowded and I am expecting to see the price run-up to 125 and beyond, the longer these traders insist on shorting the bullish wave that started in March.