Europe flat as Asia goes into holiday mode

Traders not sure what to make of jobs data

It’s shaping up to be a pretty slow start to the week, with Europe getting little direction from Asia trade overnight where various countries join China in celebrating new year in the coming days.

There isn’t much in store in Europe and the US on Monday either that will dramatically change this. Last week was packed with major political and economic events but this week looks very different, which may take its toll on volumes but also direction.

The US jobs report gave investors a bit of a lift on Friday, with job creation well exceeding expectations – 304,000 – and the shutdown having no clear negative impact on the numbers. The huge downward revision to the December number may have taken some of the edge off the report as investors seemed to battle with what the report actually means. Is the economy far better off than we think? Is the expected slowdown exaggerated? Are people’s views of the Fed too dovish? We seem to be in a state of mild confusion at this moment in time.

Aussie dips on weak housing data

Gold eyeing test of $1,300 from above on stronger dollar

We have seen some gradual improvements in the dollar since the immediate whipsaw price action which suggests that traders are taking the report at face value rather than looking for the hidden negatives or missed signals. That said, the upside has been mild under the circumstances so there is still a big element of suspicion around the reports we’ve seen over the course of the shutdown.

The gains we’ve seen in the dollar have taken the shine off gold, which has come under a little pressure in recent session. Still, the yellow metal trades above $1,300 and is yet to test this level from above. We may see that in the coming days and should it hold and rotate higher, it would be viewed as confirmation of the initial break and be a very bullish signal.

Gold Daily Chart

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Oil traders less uncertain as jobs data brings strong gains

There was clearly no ambiguity in the jobs data among oil traders, with WTI and Brent both getting a significant boost from the report, with further gains coming later in the session as Baker Hughes confirmed the number of US oil rigs had fallen by 15 last week. This continues a trend that started following the peak in November but the pace is picking up.

Lower oil prices are clearly not just bad for OPEC nations and is taking its toll on US producers also. Any sign that US supply growth – which is currently at record levels around 11.9 million barrels a day – is slowing or reversing is bullish for crude at these levels. The key resistance levels in WTI and Brent though – $55 and $65 – remain intact for now although the former is flirting just above here. A clear break has not yet happened though.

Payroll Surprises as Asia Ushers in Lunar New Year

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Former Craig

Former Craig

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.