2023-10-06 02:48

US NFP REPORT KEY POINTS: The U.S. economy is forecast to have created 170,000 jobs in September. The unemployment rate is seen ticking down to 3.7% from 3.8% previously, signaling persistent labor market tightness. A strong NFP report will be positive for U.S. yields and the U.S. dollar, and bearish for gold and stocks. Wall Street will be on high alert Friday morning when the U.S. Bureau of Labor Statistics releases its most recent employment survey. The report, which will attract a great deal of attention and garner considerable scrutiny due to its implications for the Federal Reserve monetary policy outlook, could set the stage for heightened volatility heading into the weekend. According to consensus estimates, U.S. employers added 170,000 payrolls in September following a gain of 187,000 jobs in August. Separately, household data is expected to show that the unemployment rate ticked down to 3.7% from 3.8% previously, indicating tightness in labor market conditions and a persistent imbalance between the supply and demand for workers. Focusing on wages, average hourly earnings are seen rising 0.3% m-o-m, resulting in an unchanged annual reading of 4.3%. Pay growth holds particular significance for the Fed as it serves as a potential barometer of inflationary trends. It is therefore crucial to keep a vigilant eye on this measure, particularly given that current wage pressures may not be consistent with CPI converging to 2.0%. UPCOMING US LABOR MARKET DATA Source: DailyFX Economic Calendar POSSIBLE MARKET SCENARIOS Fed officials have maintained the possibility of additional policy tightening this year, but they have not firmly embraced this scenario. This suggests a strong reliance on data as they move forward. Looking at implied probabilities, the odds of a quarter-point rate rise at the December FOMC meeting stand at approximately 31% at the time of writing. Market pricing has been in a state of flux in recent days, but the likelihood of another hike could rise sharply if the NFP data exceeds estimates by a wide margin. That said, any headline figure above 250,000 could have this effect on expectations. Should the monetary policy outlook shift in a more hawkish direction, U.S. yields are likely to extend their recent advance, boosting the U.S. dollar across the board. This particular situation is expected to exert downward pressure on gold prices and, especially, on the Nasdaq 100, where tech-related stocks may be vulnerable to significant losses. Unemployment claims have stayed extremely low by historical standards, with scant evidence of layoffs. In parallel, labor demand appears robust and resilient, as indicated by elevated job openings. These combined factors present a compelling case for a solid September NFP report (the UAW strike, which began on September 15 - the survey week- is unlikely to be fully reflected in last month's numbers). FOMC MEETING PROBABILITIES Source: FedWatch Tool On the flip side, if employment growth meets estimates or surprises to the downside, the U.S. dollar could begin to correct lower, along with U.S. Treasury yields, on the assumption that the Fed is done and will not deliver additional tightening in 2023. As traders unwind bets of further policy firming, gold prices could stage a bullish turnaround, leading to a moderate recovery in the coming days and weeks. This scenario will also benefit the Nasdaq 100, but any rally in tech stocks could be short-lived if economic conditions begin to deteriorate more rapidly, in line with projections for the fourth quarter. https://www.dailyfx.com/news/forex-us-jobs-report-preview-what-s-in-store-for-nasdaq-100-usd-yields-and-gold-20231005.html

2023-10-06 02:46

KEY TAKEAWAYS: The South African rand has weakened due to both domestic and international factors. The South African Reserve Bank will not intervene to counter the recent depreciation of the rand. The US dollar has gained strength due to evidence of a tighter labor market, suggesting potential wage inflation and a more hawkish Federal Reserve. The USD/ZAR currency pair has broken out of short-term consolidation, indicating a possible short-term target of 19.80. Traders may consider entering long positions on the USD/ZAR after a pullback from overbought territory, with a target of the resistance level at R19.80/$. The South African Rand (ZAR) has experienced a downturn due to a combination of domestic and international factors. This decline comes on the heels of comments made by South African Reserve Bank (SARB) Governor, Lesetja Kganyago. In his statement, Kganyago indicated that the SARB would not take any measures to offset the recent depreciation of the South African Rand. The afternoon session, initially saw a resurgence in the US dollar. This rise in the dollar's value can be attributed to indicators of a tightening labor market in the United States, which is the world's largest economy. The number of individuals filing for unemployment benefits last week was fewer than predicted by consensus estimates. This lower-than-expected figure is indicative of tighter wage inflation, which suggests a more hawkish stance by the Federal Reserve. However, initial strength in the dollar did start to dissipate as US equity markets opened, helping the rand claw back some of its losses. Markets are likely to find more sustainable direction from the upcoming Non-Farm Payrolls and Unemployment Claims data, which is scheduled to be released on Friday. This data is considered to be a key indicator of the health of the U.S. economy and can have a significant impact on the financial markets. For example, if the Non-Farm Payrolls data shows a higher-than-expected increase in employment, it could signal a stronger U.S. economy. This could potentially lead to a surge in the U.S. dollar, which in turn could put further pressure on the South African Rand. On the other hand, if the data shows a lower-than-expected increase, it could signal a weaker U.S. economy, which could potentially lead to a decrease in the U.S. dollar and provide some relief to the South African Rand. THE USD/ZAR BREAKING OUT OF SHORT TERM CONSOLIDATION Current price actions see’s the USD/ZAR breaking resistance of the short-term range at R19.35/$. The move higher suggests 19.80 as a possible short-term target from the move. The currency pair has however moved into overbought territory while looking to renew the short to medium term uptrend. Traders not already long into the USD/ZAR might prefer to look for long entry into a pullback from overbought territory before looking for a move towards the R19.80/$ resistance level. https://www.dailyfx.com/news/forex-rand-price-softens-on-domestic-and-international-data-fronts-20231005.html

2023-10-06 02:45

S&P 500 OUTLOOK FROM A HISTORICL AND SEASONALITY PERSPECTIVE: Historical Performance Hints at a Positive Quarter for the S&P 500. Seasonality is Not a Standalone Indicator but Can Provide Valuable Insights When Used in Conjunction with Other Market Indicators. IGCS Shows Retail Traders are Currently Net-Long on the S&P 500 with 58% of Traders Holding Long Positions. To Learn More About Price Action, Chart Patterns and Moving Averages, Check out the DailyFX Education Section. The financial markets are an intricate labyrinth where various elements intermingle to shape investment outcomes. One such critical component is seasonality, the phenomenon where certain market trends appear to recur at specific times within the year. This concept applies to various asset classes, including equities, bonds, commodities, and currencies. This article explores the significance of seasonality in financial markets and examines the historical performance of U.S equities, specifically the S&P 500 and NASDAQ 100, in the fourth quarter. UNDERSTANDING SEASONALITY IN FINANCIAL MARKETS Seasonality is a statistical pattern where certain time periods are associated with particular market behavior. This could be due to various factors such as tax considerations, the release of economic reports, corporate earnings announcements, and even psychological factors related to investor behavior. For instance, the "January effect" is a well-known seasonal anomaly where stocks, especially small-cap stocks, tend to increase in value in January more than any other month. This phenomenon is often attributed to tax-loss selling, where investors sell stocks at a loss to offset gains and reduce their tax liability, leading to a subsequent bounce back in the new year when they reinvest. Seasonality is not a standalone indicator, but it can provide valuable insights when used in conjunction with other market indicators and analysis tools. Understanding seasonality can help investors fine-tune their investment strategies, manage risk, and potentially enhance returns. U.S EQUITIES: S&P 500 AND NASDAQ 100 US Equities had been enjoying an excellent first half to 2023 with the SPX up about 19.5% to the end of July. In the two months that followed however, the S&P recorded losses of around 6.5% heading into Q4 with history painting a positive picture. Looking back at the historical picture and since 1930, there have been 12 prior years where the January-July run had seen gains in excess of 10% followed by a losing period in the months of August and September. In each of those years the fourth quarter posted gains of at least 2% each time with an average quarterly return of 8.4%. The question for bulls is whether we will see history repeat itself even though we are in somewhat uncharted territory. S&P Historic Annual Performance Source: Refinitiv, Fathom Consulting HISTORICAL MARKET DATA REVEALS A FASCINATING TREND ABOUT THESE INDICES IN Q4 The S&P 500 has historically performed well in the fourth quarter. From 1950 to 2021, the S&P 500 has averaged a gain of about 3.9% in the fourth quarter, with positive returns in 73% of those quarters. If we narrow that down even more and look at performance from the year 2000 to 2021, the S&P 500 rose during the fourth quarter in 16 out of these 21 years, indicating a positive return approximately 76% of the time with an average return of 4.3%. It's essential to break down these returns further, as the average can be skewed by outliers. The median return, which is less influenced by extremes, was approximately 5.1%, indicating that half of the fourth-quarter returns were above this figure and half were below. The best fourth quarter during this time frame was in 2020, when the S&P 500 had a return of nearly 11.7%, driven by positive news on the vaccine front and a strong rebound from the COVID-19 induced economic downturn. Conversely, the worst fourth quarter occurred in 2008 during the global financial crisis, when the S&P 500 fell by approximately 22.6%. The standard deviation, a measure of the dispersion or volatility, was around 8.7% for the Q4 returns during this period. This indicates a high level of volatility, which isn't surprising given the economic events of the past two decades, including the dot-com bubble burst, the global financial crisis, and the COVID-19 pandemic. The NASDAQ 100 also tends to perform well in the fourth quarter, although its performance can be more volatile due to its heavy tech concentration. From 1985 to 2021, the NASDAQ 100 has averaged a gain of about 4.8% in the fourth quarter, with positive returns seen in 67% of those quarters. These trends are part of a broader phenomenon known as the "Santa Claus rally," a surge in stock prices often seen in the final week of December through the first two trading days in January. The rally is typically attributed to increased investor optimism, holiday-induced euphoria, and institutional investors squaring their portfolios before the year ends. FINAL THOUGHTS AND TECHNICAL ANALYSIS While seasonality and historical trends provide insightful perspectives, they should not be used in isolation to make investment decisions. Market dynamics are influenced by a myriad of factors, and what worked in the past may not necessarily work in the future. Given that we are in what I consider an unprecedented economic climate. S&P 500 Daily Chart, October 5, 2023 Source: TradingView, prepared by Zain Vawda Looking at the technical perspective, the SPX has found support of the 200-day MA and retested the level today around 4221. Price has bounced higher on improved overall sentiment and potential profit taking ahead of the US NFP jobs report tomorrow. The S&P remains extremely bearish and if the recent attempt at a bounce is anything to go by, the current rally could prove short lived particularly if we have a positive and a better-than-expected NFP number. Immediate resistance on the upside rests around the 4325 mark with a daily candle close above leading to a change in structure from bearish to bullish as well. This could be the first sign of a potential sustained bounce to the upside and toward the recent highs. IG CLIENT SENTIMENT DATA IGCS shows retail traders are currently Net-Long on the S&P 500, with 58% of traders currently holding LONG positions. Given the contrarian view adopted here at DailyFX, is the SPX destined to fall further? https://www.dailyfx.com/news/seasonality-and-historical-fourth-quarter-performance-of-u-s-equities-s-p-500-and-nasdaq-100-20231005.html

2023-10-06 02:43

SILVER PRICE OUTLOOK: Silver prices fall modestly despite U.S. dollar softness. Traders remain cautious ahead of key U.S. labor market data. The September NFP report, due out on Friday, will be key for financial markets. Most Read: US Jobs Report Preview - What's in Store for Nasdaq 100, USD, Yields, and Gold? Silver prices fell on Thursday despite U.S. dollar softness, as traders remained bearish on precious metals given the recent jump in nominal and real U.S. yields. In this context, XAG/USD dropped about 0.2% to $20.95 in late afternoon trading in New York, in a session characterized by moderate volatility on Wall Street ahead of a key risk event before the weekend: the release of the latest U.S. employment report. The U.S. Department of Labor will unveil September nonfarm payroll data on Friday. According to the median estimate, U.S. employers added 170,000 jobs last month, after hiring 187,000 people in August. Separately, the household survey is expected to show that the unemployment rate ticked down to 3.7% from 3.8% previously, indicating persistent tightness in labor market conditions. To gauge the near-term trajectory of silver, traders should focus on the strength or weakness of U.S. NFP figures. Should the official numbers surprise to the upside by a wide margin, the Fed's outlook could become more hawkish, leading traders to increase bets in favor of another hike in 2023 and higher interest rates for longer. This scenario could boost the U.S. dollar and drag down silver prices. The opposite is also true. If the labor market disappoints and reveals cracks, traders are likely to unwind wagers of further policy firming on the assumption that the economy is about to roll off the cliff. As a result, we may observe lower U.S. Treasury yields and a softer U.S. dollar, both of which could bolster precious metals. In terms of technical analysis, silver prices are sitting above an important support zone near $20.70 after the recent selloff. Protecting this critical floor is of utmost importance for the bulls; any failure to do so could potentially send XAG/USD tumbling toward $19.95. On further losses, sellers may be emboldened to initiate an assault on $18.80. Conversely, if silver manages to stabilize and commence a rebound from its current position, initial resistance appears to be located at $22.30. Although a test of this region may lead to rejection, a bullish breakout could reignite upward momentum, paving the way for an advance toward $22.60, followed by $23.75. SILVER PRICES TECHNICAL CHART Silver Price (XAG/USD) Chart Prepared Using TradingView https://www.dailyfx.com/news/forex-silver-price-forecast-xag-usd-on-bearish-path-after-meltdown-ahead-of-us-nfp-20231005.html

2023-10-06 02:41

EURO, EUR/USD, TECHNICAL ANALYSIS, RETAIL TRADER POSITIONING – IGCS UPDATE Euro experienced best 2 days since the middle of September Recently, retail traders have started to build downside bets While that may be a bullish signal, downtrend remains intact The Euro climbed for a second trading session, marking the best 2-day performance since the middle of September. Meanwhile, it seems retail traders are starting to slowly increase downside exposure. This can be seen by taking a look at IG Client Sentiment (IGCS), which frequently functions as a contrarian indicator. With that in mind, will the exchange rate have further room to rally? EUR/USD Sentiment Outlook – Bullish The IGCS gauge shows that about 65% of retail traders are net-long EUR/USD. Since most of them remain biased higher, this continues to hint that prices may continue falling down the road. That said, we have seen downside bets increase by 7.05% and 14.98% compared to yesterday and last week, respectively. With that in mind, recent shifts in positioning hint that the Euro may reverse higher. Euro Daily Chart Despite developments in retail trader bets, the technical outlook for EUR/USD remains challenging from the bullish perspective. The key obstacle is a falling trendline from July which is maintaining the broader downside focus. As such, while the Euro may continue higher in the near term, it is going to take further upside progress to overturn the bearish technical bias. That said, we did experience positive RSI divergence recently, showing that downside momentum was fading before retail bets started to focus on more downside exposure. Before reaching the trendline, keep a close eye on the 61.8% Fibonacci extension level at 1.0631. Meanwhile, in the event prices turn lower, the 100% level at 1.0436 seems to be key support. Chart Created in Trading View https://www.dailyfx.com/analysis/euro-2-day-rally-sees-retail-bets-become-slightly-more-bearish-will-eur-usd-rise-20231005.html

2023-10-05 04:46

Oil - US Crude: Retail trader data shows 51.94% of traders are net-long with the ratio of traders long to short at 1.08 to 1. In fact, traders have remained net-long since Aug 30 when Oil - US Crude traded near 81.43, price has moved 3.56% higher since then. The number of traders net-long is 10.99% higher than yesterday and 44.11% higher from last week, while the number of traders net-short is 11.17% lower than yesterday and 40.19% lower from last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Oil - US Crude prices may continue to fall. Our data shows traders are now net-long Oil - US Crude for the first time since Aug 30, 2023 when Oil - US Crude traded near 81.43. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Oil - US Crude-bearish contrarian trading bias. https://www.dailyfx.com/analysis/CL-IG-Client-Sentiment-202310041623.html