Global stocks were flung onto a wild roller coaster ride during trading this week with most major markets violently oscillating between losses and gains as anxiety mounted ahead of the anticipated NFP. This anxiety triggered a sense risk aversion that punished Asian equities, which were already depressed from an appreciating Yen and ongoing concerns over slowing global growth. Although European markets displayed some stability during trading on Thursday, the bearish domino from Asia could encourage investors to discard European stocks for safe-haven assets. While European and Asian arenas may be poised to decline, Wall Street could enter a phase of standby as investors ponder on the potential NFP results and the effects it could have on future US rate hike expectations.
It seems that the haphazard movements in the stock markets may be the product of heightened fears over the current state of the global economy, while the violent swings in oil prices weigh heavily on sentiment. With concerns over slowing global growth rekindled and central bank caution souring risk appetite, stock markets could be poised for further declines.
NFP in focus
Investors may turn their focus towards the critical NFP report today which has the potential to provide some clarity on when the Federal Reserve plans to raise US rates in 2016. Although the Fed has refocused on domestic data as a trigger for raising US rates, fears over tepid inflation levels and faltering GDP growth could, however, overshadow today’s NFP report consequently obstructing efforts by the central bank to take action. It should also be remembered that data from the States has followed a negative path while ongoing global woes continue to expose the nation to downside risks. With expectations periodically diminishing over the Fed raising US rates in 2016, the employment report may have to be extremely impressive for optimism to be renewed.
The Dollar Index experienced a technical bounce this week but still remains bearish on the daily timeframe. Previous support at 94.00 could transform into a dynamic resistance for a further decline towards 90.00.
WTI bears still present
WTI Oil peaked to $46.00 during trading on Thursday as a combination of wild fires in Canada’s oil sands district and conflict in Libya boosted speculations of a potential decline in production. Regardless of recent gains, this commodity remains fundamentally bearish and the eroding expectations of a solution to the excessive oversupply in the markets continue to haunt investor attraction. With Oil production near all-time highs and uncertainties lingering over the faltering demand, bearish investors have been provided a foundation to send this commodity lower. This complicated prisoner’s dilemma coupled with the conflict of interest within OPEC and Non-OPEC members may spell more punishment for oil in the medium term. From a technical standpoint, a breakdown below $44 could open a path towards $41.40 and potentially lower.
Commodity spotlight – Gold
The elevated concerns over slowing global growth combined with the erratic movements in oil prices have reinforced a wave of risk aversion which has consequently boosted appetite for the safe-haven Gold. This precious metal is bullish on the daily timeframe and the diminishing expectations that US rates may be increased in 2016 may have provided an opportunity for bulls to install a round of buying momentum above $1270. If NFP is underwhelming, bullish investors could use this opportunity to send Gold towards $1300. Technically prices are trading above both the 20 and 50 SMA while the MACD has crossed to the upside. Previous resistance at $1270 could become a dynamic support which should encourage a further incline towards $1300.
Currency spotlight – EURUSD
The EURUSD experienced a sharp decline during trading this week but still remains bullish on the daily timeframe. A combination of EUR strength and USD weakness could create the correct environment for bulls to send prices to gravity defying level. Dollar weakness remains the dominant theme that resonates across the markets and a negative NFP today could provide a foundation for bullish investors to propel the EURUSD back above 1.145. From a technical standpoint, the EURUSD is firmly bullish on the daily timeframe as there have been consistently higher highs and higher lows while the MACD trades to the upside. Previous resistance around 1.140 could transform into a dynamic support that may invite an incline towards 1.155.