London GMT New York Tokyo Moscow
Premium Calculator
TOP Brokers *
* Rebate per 100,000 EUR/USD lot
<a href="//www.instaforex.com/">Forex Portal</a>
January 7, 2019

Jobs, Fed, Trade War, PBoC and Stock Market

USA100

Fresh optimism on the US-Sino trade front, PBoC policy relaxation, a new more flexible Powell Fed and a banner December Payrolls report all countered pessimism spawned by the Apple sales miss, an extended government shutdown and previous growing signs of economic slackening.

This welcome turn of events was anchored by the “remarkably strong” jobs report that contradicted the financial markets’ worst fears about the deterioration of the economy that had virtually priced out further Fed rate hikes and even flagged risk of a rate cut by year-end.

Meanwhile, Fed Chairman Powell’s AEA interview, flanked by former Fed chairs Yellen and Bernanke, assuaged fears that he was out of touch with the markets’ contractionary inclinations. Indeed, Powell carefully chose his words to convey some sympathy with the concerns about slowing growth (even mentioning the drop in the ISM) and stated that he would revisit balance sheet reduction, if it indeed was causing problems in the market. He expressed “sensitivity” to the message the markets are sending, and is prepared to adjust policy, which is not on a preset path, especially with muted inflation. He also ruled out resigning if requested to do so by Trump, given the independence of the Fed, which is “in its DNA.”

Meanwhile, stock as well as bond markets got a boost from cautious words from Fed Chairman Powell, and progress on China trade negotiations.

This was reflected in the “V-shaped” 4.4% rebound on the NASDAQ comp Friday and near-14 basis point reversal higher in the T-note yield to 2.67%. Having probed 370 points, on Boxing Day, the USA100 equity volatility index retreated back down to 6,124 area.

However as Wall street’s roller coasters on, for the 5th month in a row, the bulls latest attempts to boost price higher, does not seem sufficient yet. The price action remains below 50- and 200-day SMA, within a downtrend channel, and with weekly SMA crossing bearishly, (20- crosses below 50-week SMA).

Momentum confirmed a slight pickup since Boxing day’s rebound, however both RSI and MACD lines present weakness to continue northwards. In the long-term they bith remain within the negative territory, suggesting that V-shape could be triggered as a correction to 5-month decline.

The round 6,400 level and the Resistance seen , in the last week of December, could now provide an immediate Support area for the pair, at 6,390-6,400. The return below this area would reach 2018’s bottom.

To the upside 6,480 is now a Resistance, at day’s peak. If the asset closed above this area, this would indicate that upside surprise risks are prevailing for now. Above this barrier, the next level to be watched is the 50-day SMA, which provided strong Resistance handle for the asset the past 5 months. Further gains could reach 50% retracement level which coincides with FE100.0 , at 6,745.

Click here to access the HotForex Economic calendar

Andria Pichidi

Market Analyst

HotForex

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

back
Found a mistake? Select it and press Ctrl+Enter.
Forex trading can involve the risk of loss beyond your initial deposit. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary. Risk Warning. Privacy Policy. Registration Agreement.