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Market Outlook

Fridays Jobs report and trump to set the agenda

The Trump government continued to be in the news during the previous week.

Trump’s former security advisor Flynn presented a guilty appeal to Special counsel Mueller for fibbing to the FBI, Trump was prompt to renounce him and tagged him as part of ‘Obama’s old team’. Meanwhile, Republican senators cleared the Tax bill in the senate following a tight vote to give Trump a boost.

Gold faced pressure the previous week as treasury yields and the dollar shot up over likelihood of the tax reform bill getting cleared in the senate. Gold touched a low of $1269.60/oz. couple of dollars above the 200dma before buyers came back. News of Flynn presenting a guilty plea and Mueller receiving it sent Gold rising $20/oz. to $1290/oz. as political analysts even talked about Trump’s impeachment as a likelihood. Prospects of the tax reform bill’s passing controlled the revival as Gold eventually settled at $1279.90/oz.

EURUSD was in for another decent week, owing to robust economic figures from the Euro mainland and Merkel’s enhanced probability to constitute the government in Germany. EURUSD began the week on a feeble note but gained support at the 1.1800 level which held twice to recover before making a weekly high of 1.1940 and close the week at 1.1897.

GBPUSD recovered 300 pips from the week’s low as UK and EU reached an arrangement on the ‘divorce bill’ for about £50bn. GBPUSD was also backed by positive outcome from BoE’s bank stress tests and a boost in the manufacturing sector that attained the highest level since 2013.

USDJPY monitored US treasury yields and Trump’s fortunes as it held the lows of 111.00 to close the week at 112.16.

USDCAD had followed the robust dollar and reached 1.2900, when the jobs statistics came out with optimistic figures. Canada was ready to add 10,000 more jobs, but added almost 8 times that figure, with unemployment plunging to 5.90%, a 9-year low. CAD was also aided by stronger oil price after OPEC extended the production cut to 2018-end. The net result was USDCAD shedding 230 pips to close the week at 1.2677.

The upcoming week is expected to be an action-packed one. A crucial NFP is expected this Friday, development in Mueller’s probe into Trump’s Russian link will draw traders’ focus.

Gold will follow US interest rate hike forecasts and Trump’s political fortunes for impetus. Till now neither has given it a distinct signal but that could end shortly. Interim support for gold exists at $1267/oz. and resistance at $1296/oz. Any more negative press pertaining to Trump’s Russian link would end the positive vibes his tax reform development has made. Concerning the tax reform bill, albeit the early reaction was dollar positive, the $1.40 trillion dent that it’s going to make in the US budget needs immediate attention.

EURUSD has a comparatively less eventful economic calendar ahead with Monday’s Euro group meeting and Tuesday’s services PMI as the crucial happenings. EURUSD has made a base at 1.1800 and it should be sustained for this week barring any major shocker.

GBPUSD would direct its attention to the meeting between UK PM May and her EU counterparts on Monday. Any Brexit-related news would be followed keenly by GBP. Also on economic announcements UK construction and services figures will be announced on Monday and Tuesday respectively. On charts GBPUSD has been tough to read but the mark for the bulls to achieve would be 1.3650.

USDCAD has the BoC interest rate announcement on Wednesday. It would be interesting to see what BoC has to say following Friday’s rather robust jobs statistics. Of late BoC had cautioned the markets about the need to slow down its pace. On charts, USDCAD has support at 1.2650 and 1.2570 following a weak ending and pullbacks are likely with 1.2730 as direct resistance.