The U.S. dollar weakened on Friday amid the jobs report which dented the market sentiment which was already turning sour. Concerns of a global slowdown engulfed the equity markets. This sent the U.S stock markets weaker with a minor risk on sentiment that prevailed.
Data from China showed that dollar-denominated exports had fallen 20.7% in February. This was a bigger than expected slump as economists forecast a decline of just 4.8%. Imports were down 5.2% against expectations of a 1.4% decline. The trade surplus for China came to $4.12 billion which was much below the $26.38 billion anticipated.
Over the weekend, China’s inflation data showed that consumer prices eased to an annual pace of 1.5% on the year in February as had been expected. This marked a weaker pace compared to the 1.7% increase the month before. Producer prices index rose 0.1% on the year as expected.
Economic data on the day showed that Germany’s factory orders fell 2.6% on the month in January, missing estimates of a 0.5% increase. January’s decline followed December’s gain of a revised 0.9% increase.
French industrial production figures were also better than expected, rising 1.3% on the month. This beat estimates of a 0.1% increase while Italian industrial production rose 1.3%.
NY Trading Session
The NY trading session saw Canada’s housing starts adding just 173k which missed estimates of an increase to 204k. The monthly employment report showed that Canada added 55.9k jobs during February. This surpassed estimates of a 0.6k increase for the month. The unemployment rate held steady at 5.8% as expected.
The main highlight of the day was the U.S. payrolls report. Following the weak release of ADP private payrolls, data showed that the economy added just 20k jobs during February. This missed estimates of a 180k increase. Data for January was revised up to show 311k jobs added during the month.
Average hourly earnings rose 0.4% beating estimates of a 0.3% increase. Meanwhile, the unemployment rate dipped to 3.8% against forecasts of a drop to 3.9%. In January, the U.S. unemployment rate came in at 4.0%. Building permits and housing starts data released later in the day showed an increase of 1.35 million and 1.23 million respectively.
Fed Chair Jerome Powell was speaking over the weekend. In Stanford, California, Powell said that the Fed was in no rush to hike rates amid muted inflation. “Despite this favorable picture, we have seen some cross-currents in recent months,” Powell stated regarding labor markets.
“With nothing in the outlook demanding an immediate policy response and particularly given muted inflation pressures, the committee has adopted a patient, wait-and-see approach to considering any alteration in the stance of policy”
These comments came in a week ahead of the March FOMC meeting.
Looking ahead, the economic data today kicks off with Germany’s industrial production figures. Economists forecast industrial production to rise 0.5% on the month following a decline of 0.4% in December. Trade balance figures later follow this.
The NY trading session is relatively quiet. The retail sales figures are due for January and economists estimate a 0.4% increase in core retail sales. This follows a big dip of 1.8% for the month before. Headline retail sales are expected to remain unchanged for the month after falling 1.2% previously.
EURUSD Intraday Analysis
EURUSD (1.1231): The EURUSD closed last week on a bearish note finally breaking the range. However, price action is still not out of the woods for the moment. Price briefly tested the 1.1200 level before pulling back modestly. On the weekly time frame, the EURUSD remains bearish, trading within the descending price channel. If price breaks below this support, the common currency could extend declines down to 1.0728 where an unfilled gap from April 16, 2017, could be filled. Price action on the lower time frames remains choppy at best. The current rebound in prices could see the EURUSD testing 1.1296 where resistance is likely to be established in the near term.
USDJPY Intraday Analysis
USDJPY (111.09): The USDJPY currency pair was seen trading bearish last week with Friday’s price action briefly extending down to 110.77 before pulling back. The rally to 111.90 marks a 61.8% retracement from 3rd October 2018 highs through 4th January lows. In the near term, USDJPY is likely to see a minor pullback. However, if the previous highs are not breached, USDJPY could be looking to post declines to test the 109.74 level of support that is pending a retest.
XAUUSD Intraday Analysis
XAUUSD (1297.36): Gold prices reversed losses on Friday as price action resulted in a strong bullish candlestick by Friday’s close. The reversal comes following the past three sessions which saw gold prices closing with a doji candlestick pattern. On the 4-hour chart time frame, gold is seen posting a hidden bearish divergence with the higher highs in the Stochastics resulting in a lower high in price. This predicts that price could correct to the downside in the near term. The recently breached resistance level at 1290.30 is likely to be retested in the near term for support. A rebound off this level will signal further gains to the upside. Gold is likely to target 1305 – 1306 level with the potential to correct towards 1321 – 1318 level.