Forexlive Americas FX news wrap: ADP disappoints but it can't stop the euphoria
Forex news for North American trading on September 2, 2020
- Tesla and Apple dips can't derail the stock market runaway train
- Robinhood faces probe over selling client orders
- One of the reasons markets are buoyant: School reopenings are working
- CDC has asked states to prepare for a possible Covid vaccine by late October/early November
- Crude oil futures settle at $41.51
- Fed's beige book :Economic gains were generally modest. Activity remained well below pre-Covid levels
- ECB's Weidman: extraordinary fiscal monetary support must be temporary
- CDC: US Covid cases rise by 43,249 vs. 32,087 yesterday
- More from Cleveland Fed Pres. Mester: Will take some time for economy to recover
- SNB Zurbruegg: Currency interventions are not intended to weaken franc for advantage of exporters
- Fed's Mester: US recovery appears to be 'fragile'
- European shares end the day with gains
- Ramsden: BOE can step up QE pace significantly if needed
- BOE's Broadbent: No sign of inflation expectations drifting away from target
- US weekly EIA oil inventories -9362K vs -2000K expected
- US July factory orders +6.4% vs +6.1% expected
- ISM August New York business conditions 42.9 vs 53.5 prior
- BOE's Vlieghe: There is a material risk it could take years for economy to hit capacity
- Barnier: I didn't see any change in the UK position this week
- Canada Q2 labor productivity +9.8% q/q vs +6.5% expected
- ADP US employment +428K vs +1000K expected
- The USD is the strongest and the EUR is the weakest as NA trader enter for the day
It is hard not to start with something like "the NASDAQ and S&P closed at record highs" when you want to focus on the moves in the forex market. However, when each day sees a another 1% or so higher in the NASDAQ/S&P, and records continue to be broken day in and day out, it's hard not to acknowledge the numbers.
For the day, the Dow industrial average led the way with a 454 point or 1.59% gain to 29100.50. The prices within 469 points of the all-time high price at 29568.57 reached back on February 12. The NASDAQ index and S&P index continue to already trade at new record highs and have been for the last 10 or so trading days (if not more). The S&P index rose by 1.54% while the NASDAQ index rose by 0.98%.
The catalyst for the day?
The US ADP employment estimate should not have helped. It rose by 428,000 new jobs but that was well below the 1 million expected. On Friday the more followed Labor Department jobs report will be released with expectations for a 1350K vs. 1763K last month. The ADP report for July came in at 212K. The disconnect between ADP and the Labor Department numbers may be the reason for the run higher in stocks. Why follow something when it is not doing a good job of reflecting the true employment picture (or so it seems?).
July factory orders in the US came in a bit better-than-expected 6.4% vs. 6.1%. The durable goods orders were also revised marginally higher from the preliminary report from the week or so ago.
Oil inventory data, showed increased demand for oil and gasoline in the current week. Oil inventories showing a larger than expected drawdown of -9.36 million barrels vs. -2.0 million estimate. Gasoline inventories also showed a bigger than expected drawdown (-4.3 million vs. -3.0 million estimate).
Fed's Mester called the US recovery fragile, but with the new framework for inflation and monetary policy, even if the economy rebounded, the Fed will likely stay on hold for years until inflation averages over 2% for an extended time period. If the economy falters because of his fragility, the Fed will continue to pump liquidity.
In the forex market, the US dollar started the day as the strongest of the major currencies. By the end of the day, it gave up that distinction to the Canadian dollar - despite lower oil prices for the day (Crude oil fell by $-1.15 or -2.69% to $41.61).
The greenback was still higher vs. most of the majors (the CAD and the NZD were the exceptions) and was higher earlier in the session before an afternoon sell off into the close.
A look at some of the technicals of the major pairs are showing:
EURUSD: The EURUSD tried to retrace some of the earlier declines after the US ADP report. But before the price could extend to the 50% midpoint of the move higher since August 27 at 1.1886, sellers entered and push the price back below its 200 hour moving average at 1.18566. The low price stalled around the 1.1822 level and waffled between that level and 1.1850 before a rally in the last hour took the price back up to retest the 200 hour moving average. In the new trading day that 200 hour moving average will be the barometer for the buyers and sellers. Move above is more bullish. Stay below keeps the sellers more in control.
GBPUSD: The GBPUSD held support against its 100 hour moving average in the Asian and London morning sessions. In the New York session however the price cracked below that moving average line (at 1.3332) and led to a run to 1.3282 before rotating back to the upside. Like the EURUSD, the pair had a last run to the upside in the last hour of trading that has taken the price back above its 100 hour moving average currently at 1.33402. That moving average will be the barometer for the pair in the new trading day.
AUDUSD: The AUDUSD was the weakest currency coming into the New York session and dipped to a new session low at 0.7300 in the morning session. However the last 7 hours saw the price call back some of the days declines. The current price is trading at 0.7336 into the close. It's 100 hour moving average is above at 0.7348. If the price can remain below the 100 hour moving average in the new trading day, the bears would remain in control. Move above and could be some further buying momentum.
USDCAD: As mentioned the CAD was the strongest of the majors despite the sharp decline in oil prices. Then again the larger than expected drawdown of oil inventories should have sent the price of oil higher instead and that typically supports the loonie. So maybe, forex traders were simply ignoring the oil price action. Anyway technically, the price of the USDCAD tried to trade above its 100 hour moving average. On 6 separate hourly bars, the price moved above that moving average level (currently at 1.3065), but momentum faded on each attempt. The pair closed near the lows for the day (currently at 1.30422). In the new trading day stay below the 100 hour moving average keeps the bears more in control.