Equities in spotlight before Non-farm

4 May, 2018

It could be a case of the straw that breaks the camel's back with the upcoming non-farm payroll data due out tomorrow. So far there have been some very strong economic figures out from the US economy, but there are also worries that Trumps trade wars could push the US economy into a recession, a voice that has been echoed recently by a letter signed by 1000 economists warning him of such at thing. However, the market will be watching employment figures as usual and with a keen sense of interest to see if Trump has made a dent in them recently as we start to head into the summer period. So far the market is expecting 192K tomorrow, which is a lot more robust than the previous 103K reading we saw last month, and a drop in the unemployment rate to a record 4%, something that seems tantalising close for the US economy.

Today however we saw the market react sharply though to bad news as US durable goods (core) m/m missed expectations to come in at 0.1% (0.5% exp), and the worry is that with non-farm payroll we could see another sharp turn in the market again. Something that would play out across the US dollar and of course US equity markets.

The biggest impact today was on the S&P 500 which faltered sharply in today's trading before clawing back some ground as the bulls rushed back into the market. At present the US equity markets are very vulnerable to economic data and we've seen some big swings as of late. We've also seen the S&P 500 looking to sit between the 200 day moving average and the 100 and this looks like it may continue unless we saw a solid breakout of these levels. A very weak non-farm figure  tomorrow could push the S&P 500 much lower as markets are quite jittery at present compared to a year ago. If we see a positive figure I would look to see a push back up to the 100 day moving average at present, as it looks to act as dynamic resistance in this market.

Across the Pacific and the bears took a break today from the AUDUSD as it was upbeat for a change. This was on the back of weaker US dollar, but also the fact that the AUDUSD encountered strong support at 0.7472 as it bottomed out. There is a chance we could see further bearish pressure tonight with the Monetary policy report, so traders will be looking for a retest here and potentially a move to lower support at 0.7371. In the event it's hawkish I would expect a breakout above 0.7546 and potentially move to the topside of 0.7638 as the bulls will be keen to have a crack at this one. All in all though, the Australian economy continues to struggle so it may be a hard ask for the Reserve Bank of Australia to be more optimistic at present - especially based of their recently neutral statements.  


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