The North American employment data published on Friday showing an unemployment rate that fell to 5.4% and a non-farm payroll figure of 943k, in addition to a revision of the previous month's data to 938k, acted as catalysts for more directional movements in the foreign exchange and fixed income markets.
The yield on the 10-year Tnote bond has soared from 1.17% - last week's lowest point - to the current level of 1.33%, causing widespread increases in the US dollar against all its counterparts.
The Federal Reserve members' speech already hints towards an early start of the asset tapering program that can be announced as early as the Jackson Hole meeting in August.
Yesterday it was the turn of Bostic, who said that if the upcoming employment data continues to be as strong as the last one published, the Federal Reserve's objectives could be met in a couple of months. FED member Rosengren also pointed that the asset tapering could start in September.
Therefore, everything indicates that we are very close to the moment when the Federal Reserve will announce the beginning of the stage in which the purchase of treasury bonds will be reduced. Once this happens, the evolution of the market will depend on the rate of reduction adopted. In turn, this will depend on the strength of the recovery of the North American economy, with the main focus on labor market data and inflation figures. Tomorrow the CPIs for the United States will be published, and if they continue with their upward trend, they could accelerate the market movements that began last Friday.
The US dollar has seen considerable bullish momentum since then. The dollar index, as we can see in the graph, is at the highest level since March 2020. It is heading towards an important pivot level located at 93.47 that would trigger a long-distance double bottom that could have as a potential target the zone of 97.70, a level equivalent to a price of the EUR/USD around 1.11 - 1.12.
On the other hand, the action is also developing in the raw materials market. Fears of new mobility restrictions already being implemented in China and Australia could spread to Europe and the United States, and could negatively impact demand for crude. To this, must be added the latest inventory data that showed growth above expectations.
Oil has fallen more than $6 in the last few days and is technically moving around the support level located at $67.22 per barrel, where the 100-day SMA line also passes.
Below this support, the next downward target would be around the $62/ barrel area. Everything will depend on the weekly inventory figures that are published and, above all, on the evolution of the pandemic that could affect global demand for crude oil.
Sources: Bloomberg.com, reuters.com