US Job Report
Friday September 2nd 2016
Despite summer period should be over good volumes and volatility are still missing from the financial markets. We did not see much of a follow up after the Jackson hole speech in any asset class. Probably the only product with a decent volatility is Oil which is stuck on the 40/50$ range but with rather wild daily price movements. As every first Friday of the month today we had the US Job report which did not beat expectations: 151K vs exp. 186K (August); unemployment came out at 4.9% vs exp. 4.8%. It is worth noting that new orders for U.S. factory goods (out today but normally ignored by the market) recorded their largest increase in nine months in July as demand increased broadly. EUR/USD and US 10-year after the first algorithmic move on the upside decided that overall data wasn’t bad enough and September rate hike could be still well in place.
EUR/USD spiked higher at around 1.1241 for then retrace back at 1.1151 making new daily lows. Very choppy and difficult to trade which reflect a lot of indecision about the September FED meeting. While we are all waiting for ECB Chair Mario Draghi to speak on September 8th, our trading ideas remain pretty much unchanged from last week: a good short-term buy is around the 1.1050 area whereas a good sell is still around 1.1350/1.14. The one with more risk appetite could start speculating on a September rate hike and start selling at 1.1200. If we go through the 1.1050 next support lies at 1.0920.
We did not have much out this week in terms of fundamentals for the base metals complex. Few things worth to highlight are the following: on the copper market we still have a build-up in LME stocks as around 45’000 tonnes did enter the LME warehouses during the week to a total of 318’500 tonnes. Stocks in Shanghai are decreasing which give reason to think of an arbitrage game even though in Shanghai we still have more than 150’000 tonnes. On tin we had the news of Refined Bangka Tin to restart production; RBT reportedly had an export permit for 12,000 tonnes of refined tin this year, but shut down in February for environmental concerns. On zinc we had the Nyrstar’s management decision to hedge themselves up against potential downside price movements. This would affect only the so-called “free metal” output which is basically the additional zinc metal it extracts through processing over and above the metal content it has paid miners for. Nyrstar produces around 93’000 tonnes a month of zinc and they locked it at current prices only 8’000 tonnes per month. To conclude on a more general note on Wednesday night we had the PMI Manufacturing out of China: 50.4 vs exp. 49.9 the official one and 50 vs exp. 50.1 the Caixin one. They are both for the month of August and even if not stellar numbers they do show some sign of recovery. Everyone one is now waiting for the G-20 (04/05 of September) meeting in order to grasp the future intentions of the Chinese government over the economy.
Let’s now switch to the technical side of the market with some trading ideas for next week:
Aluminium market is at a key level, 1590/1600$ and if we break through here we could easily go down 40 more bucks at around the 1560/40$ level. Here buyer should come back in again to defend the longer term daily up trend. Sellers need to wait for a pull-back at around 1620/1630$.
The copper market did defend for the whole week the 4580/4630$ area which is a key support and is still intact. We had a very tight trading range this week and indications remain pretty much unchanged from last week. In order to try a buy at current levels stops need to be very tight (below 4580$). If we firmly break through here we will see the 4550$ first and the 4480$ next. First good resistance for sellers is at 4750$.
Lead did move sharply on the upside apparently on the back of a better than expected Chinese data and arrived as far as 1955$. Around 1975/2000$ should lie a good resistance (the high side of the daily and weekly channel). Support is now at 1850$.
Nickel looks like did find support so far at the 9700$ level and today we manage to climb above the 10000$ again. Definitely a good sign as it may continue next week. Sellers first resistance is at 10200$ and then 10500$. Buyer now need to wait for a pull back at 9700$ or the breakthrough of the 10200$.
Zinc: not much to say on Zinc as it only goes up. Difficult to trade. This week we went through the 2330$ and we are now heading toward the 2411$ which is a key resistance (very tight stops). Careful of a false breakout as lots of stop losses must lie just about that level. If we go through here it may open the road for the 2600/2700$. Buyer just need to buy it anywhere really.
Tin is another difficult market where we only go up with no pull-backs no retracement, nothing. We went through the 19000$ so the next target is now the 20000$, big psychological level. First good support is now 18900$ and then 18100$.
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