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Dollar Spikes Down after Huge NFP Miss, Gold Upside Breakout

Dollar spikes lower in early US session after huge NFP miss. But the selloff is only firm against commodity currencies at the time of writing. In particular, the greenback is trying to recovery against European majors, as well as Sterling. Traders might need a bit more time to make up their mind. While a September announcement on Fed tapering is now looking much less likely, it could still come in November.

Technically, EUR/USD is struggling to break through 1.1907 resistance with power for now. We’d continue to pay attention to this level. Sustained break would turn near term outlook bullish for 1.2265/2345 resistance zone. At the same time, Gold breaks out to the upside, but there is no follow through buying through 1832.47 resistance yet. Sustained break of this resistance should bring even stronger rise to 1916.30 resistance next.

In Europe, at the time of writing, FTSE is up 0.14%. DAX is down -0.01%. CAC is down -0.62%. Germany 10-year yield is up 0.014 at -0.368. Earlier in Asia, Nikkei rose 2.05%. Hong Kong HSI dropped -0.72%. China Shanghai SSE dropped -0.43%. Singapore Strait Times dropped -0.16%. Earlier in Asia, Japan 10-year JGB yield rose 0.0073 to 0.042.

US NFP grew only 235k, unemployment rate dropped to 5.2%

US non-farm payroll employment grew only 235k in August, well below expectation of 750k. Notable job gains occurred in professional and business services, transportation and warehousing, private education, manufacturing, and other services. Employment was still down by -5.3m from pre-pandemic level in February 2020.

Unemployment rate dropped from 5.4% to 5.2%, matched expectations. Number of unemployment persons edged down to 8.4m. Both measures remain far above their levels prior to the pandemic (unemployment rate at 3.5% and unemployed at 5.7m). Labor force participation rate was at 61.7%, staying in the 61.4% to 61.7% since June 2020.

Average hourly earnings rose 0.6% mom, above expectation of 0.4%.

Eurozone retail sales dropped -2.3% mom in Jul, EU down -1.9% mom

Eurozone retail sales dropped -2.3% mom in July, well below expectation of 1.2% mom rise. For the month, the volume of retail trade decreased by -3.5% for non-food products, by -1.6% for automotive fuels and by -0.7% for food, drinks and tobacco.

EU retail sales dropped -1.9% mom. Among Member States for which data are available, the largest monthly decreases in total retail trade were registered in Ireland (-5.9%), Germany (-5.1%) and Austria (-3.9%). The highest increases were observed in Croatia (+2.5%), Malta (+2.3%) and Luxembourg (+2.2%).

Eurozone PMI composite finalized at 59.0, strong GDP rise on cards for Q3

Eurozone PMI Services was finalized at 59.0 in August, down from July’s 59.8. PMI Composite was finalized at 59.0, down from 60.2. Looking at some member states, PMI composites were generally strong: Ireland (62.6), Spain (60.6), Germany (60.0), Italy (59.1), France (55.9).

Joe Hayes, Senior Economist at IHS Markit said: “It was another solid result for euro area businesses in August, according to the PMI numbers, which still point to rapid rates of expansion in output and demand…. but a step down since the preliminary ‘flash’ number tells us that this growth momentum is fading… Regardless, another strong quarter-on-quarter rise in GDP is on the cards for the third quarter, and we’re certainly on track for the eurozone economy to be back at pre-pandemic levels by the end of the year, if not sooner.”

Germany PMI Services was finalized at 60.8 in August, down from July’s record high of 61.8. PMI Composite also dropped to 60.0, down from July’s all-time high of 62.4.

France PMI Services was finalized at 56.3 in August, just slightly down from July’s 56.8. PMI Composite was finalized at 55.9, slightly down from June’s 56.6.

UK PMI services finalized at 55.0, staff shortages, self-isolation rules and stretched supply chain capacity

UK PMI Services was finalized at 55.0 in August, down from July’s 59.6, and way below May’s record high of 62.9. PMI Composite was finalized at 54.8, down from July’s 59.2. Markit said recovery in business activity eased further from May’s peak. Employment numbers rose at fastest rate since survey began in July 1996. Business optimism also climbed to three-month high.

Tim Moore, Economics Director at IHS Markit, which compiles the survey: “The service sector lost momentum for the third consecutive month as the impact of looser pandemic restrictions faded in August. Many businesses suffered constraints on growth due to staff shortages, self-isolation rules and stretched supply chain capacity.”

Australia retail sales dropped -2.7% mom in Jul, NSW down -8.9% mom

Australia retail sales dropped -2.7% mom in July, the largest decline this year.

Ben James, Director of Quarterly Economy Wide Surveys, said: “Lockdowns and stay-at-home orders in many parts of Australia continued to impact retail trade in July, with many non-essential retail businesses closing their physical stores.

“In particular, the first full month of lockdown in New South Wales, following the Delta outbreak in June, saw retail turnover in the state fall 8.9 per cent. This was the largest fall of any state and territory since August 2020.”