The US Dollar was trading lower against other major currencies as the US Dollar Index, which represents a basket of currencies against the dollar closed 0.38% lower. Of emerging market currencies the Russian Ruble (RUB) was weaker in times of political escalations between Russia and the ‘Western’ countries, while Russian Central Bank reported higher reserves at $458B and inflation was as expected at +2.4% y/y.
Escalating trade tensions between the US and China were one of the most significant factors for market developments on Friday. US President Trump admitted that a trade conflict could cause some pain but be ultimately worth it. Chinese media reported that China is not considering to bow down and accept these developments and continue with retaliatory measures despite also ‘pain’ to the Chinese economy. Measures discussed as retaliation by China among others, is to cut off US companies from the lucrative Chinese market.
US Non-Farm Payrolls (NFP) showed only 103 thousand new jobs created, which was far below expectations of 175 thousand more jobs. The Unemployment Rate at 4.1% was also worse than expected (expectation 4.0%). Analysts suggest that a weaker than expected job market could be one factor for the Federal Reserve to consider, whether to go with 3 or 4 rate hikes this year.
With these developments gold settled higher, while equity indices and oil were down.
Cryptocurrencies gradually recovered over the course of the weekend with Bitcoin bouncing up from the low on Friday at around $6,500.
On Monday Switzerland releases unemployment figures, followed by Germany with its trade statistics. In the US the Halifax House Price Index (HPI) will be released. Multiple countries are set to publish inflation data, with China and the US on Wednesday, France on Thursday and Germany on Friday.
Rising trade tensions in the US as well as disappointing Non-Farm Payroll (NFP) data put pressure on the Greenback on Friday. The NFP reported only 103,000 new jobs, compared to expectations of 175,000 jobs created and 313,000 reported in the previous month. Consumer credit was at only $10.6B (expected $15.1B). It is assumed that consumer credit is correlated to consumer confidence and spending.
On Monday Germany will publish its Merchandise Trades statistics. Then on Tuesday France and Italy are releasing their recent Industrial Production (IP) data.
Pivot: 1.2245 Support: 1.2245 1.2215 1.219Resistance: 1.229 1.231 1.2335 Scenario 1: long positions above 1.2245 with targets at 1.2290 & 1.2310 in extension. Scenario 2: below 1.2245 look for further downside with 1.2215 & 1.2190 as targets. Comment: the RSI shows upside momentum.
Gold
Gold was pushed higher on Friday by concerns about a further escalating trade war between the US and China. A weaker Dollar and lower US Treasury Yields helped gold to trade higher and close at a weekly gain. A weaker Dollar makes gold less expensive in non-Dollar economies, while lower Treasury yields reduce the interest rate gap to gold, which does not pay interest. This reduced gap in theory makes gold more attractive compared to bonds for safe-haven investment.
The developments in trade policy between the US and China could further influence the markets. As the Federal Reserve takes inflation into consideration for determining its monetary policy, the Consumer Price Index (CPI) data due on Wednesday in the US could give further impulses.
Pivot: 1326 Support: 1326 1319 1314.5Resistance: 1335.5 1341 1348.5 Scenario 1: long positions above 1326.00 with targets at 1335.50 & 1341.00 in extension. Scenario 2: below 1326.00 look for further downside with 1319.00 & 1314.50 as targets. Comment: the RSI lacks downward momentum.
WTI Oil
Oil closed lower on Friday, now for the second week in a row. Initially the announcement by US President Trump to levy tariffs on additional $100 billion worth of Chinese imports to the US sparked uncertainty. The concern that this trade war would escalate and thus affect economic output negatively was exacerbated by China vowing to retaliate against any new US tariffs while both sides are willingly taking economic ‘pain’ into consideration as to not to back down.
The US Baker Hughes Oil Rig Count was up by 10 operating oil rigs to 808 at its highest value since 2015.
On Tuesday the American Petroleum Institute (API) will release oil stockpile figures, followed by the Energy Information Administration (EIA) on Wednesday.
Pivot: 62.85 Support: 61.6 60.85 60.1Resistance: 62.85 63.7 64.15 Scenario 1: short positions below 62.85 with targets at 61.60 & 60.85 in extension. Scenario 2: above 62.85 look for further upside with 63.70 & 64.15 as targets. Comment: the RSI lacks upward momentum.
US 500
Increased trade politics tensions but also a disappointing NFP report put pressure on equities and erased the gains seen in the middle of the week, so that the US 500 (S&P 500) closed lower on a weekly basis.
The biggest decline was seen with biotech (US Biotech ETF -2.99%) and chip makers’ (US Semiconductors ETF -2.91%) stocks. Military and aerospace company Lockheed Martin (NYSE:LMT) (-3.29%) was under pressure as the Pentagon ordered the company to reduce the cost for the F-35 jet program.
This week we will see again an increased number of companies reporting their quarterly earnings. Among other companies on Thursday Delta Air Lines (NYSE:DAL) and on Friday JP Morgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) are set to disclose their earnings.
Pivot: 2584 Support: 2584 2571 2560 Resistance: 2639.5 2656.5 2672 Scenario 1: long positions above 2584.00 with targets at 2639.50 & 2656.50 in extension. Scenario 2: below 2584.00 look for further downside with 2571.00 & 2560.00 as targets. Comment: the RSI advocates for further upside. The prices bounced off the key support at 2584.00, and are expected to post a new rebound.