US Open – Washington the Centre of the Storm

Jobs Report May Turn Things Around

European stock markets are in the red, while US futures are eyeing an end to their week long rally ahead of the open on Friday.

Of course, that may well change by the time we hear the opening bell on Wall Street, with the jobs report coming an hour earlier. If Trump’s assurances earlier this week are anything to go by, the turnaround could be complete before the market opens. The ADP number on Wednesday suggests he may have been a little premature but let’s face it, it’s been way off plenty of times in the past.

I guess we’ll soon know just how concerned investors are by heightening tensions between the US and China after Trump once again took aim at Chinese tech firms with executive orders on Thursday. There’s still a long way to run in the tech war between the two countries, especially if Trump can somehow emerge victorious in November. I see little to no chance of China not retaliating if the US bans TikTok or Microsoft successfully acquires it. This is just the beginning of another ugly fight between the two.

Let’s also not forget the fight on Capitol Hill between the Republicans and the Democrats. The end of week deadline is looking increasingly unlikely, despite the threats of more executive orders from the White House. An undesirable conclusion here is also possible, which is contributing to this pre-NFP caution. A knockout jobs report will probably paper over the cracks though. An ugly end to the week could greet a the opposite.

Gold remains bullish despite pullback

Gold could be the one to watch today as efforts to determine its risk role continue. Today we’re seeing some risk aversion ahead of the jobs report and the dollar is once again being favoured, seeing gold pulling off its highs. As it stands, it’s still looking pretty healthy though and it may take a pretty horrible report to test $2,000 again. It’s come a long way.

There are a growing list of risk factors in these markets which should keep things interesting for weeks to come. US Covid cases and deaths are showing slight improvements this week, albeit from high levels, but we’ll need a lot more improving data to calm the nerves. Geopolitics isn’t improving any time soon so gold will remain volatile.

Oil pares back on stronger dollar

Oil’s midweek breakout was no gamechanger but it continues to trade towards the upper end of its two month range. The rally carried little momentum, further suggesting we’re at the latter end of an exhausted move but that, in itself, doesn’t mean we’re going to see a broad correction. It may just mean traders aren’t ready to jump fully back on the crude train yet, with Covid setbacks happening every week around the globe, the outlook remains uncertain. There’s a long and bumpy road ahead for the global recovery, we’ll have to learn to be extremely patient.

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Craig Erlam

Craig Erlam

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.