Markets regain a positive risk sentiment ahead of the NFP - Market Overview

By: Miguel A. Rodriguez

14:22, 07 May 2021

Waiting for the Non-farm Payroll figure this afternoon, the markets return to more optimistic risk sentiment.

Previously published employment reports suggested positive NFP numbers, with the average forecast in favor of a 978k figure. Jobless Claims dropped 498k, lower than expected, while the ADP figure was also positive.

Meanwhile, central banks are more and more in favor of reducing their asset purchase programs. Yesterday, the Bank of England announced its intention to withdraw stimulus, as the economy is in full recovery mode, with the latest data being increasingly positive. The same is happening in Europe as well, with ECB members announcing that the reduction in asset purchases could begin as soon as the month. And although Fed officials were not very explicit in this regard, the general market consensus is that they will join this trend sooner rather than later.

How did the EUR/USD pair react?

This has caused the EUR /USD to surge to 1.2090 from 1.2050. Should the pair close above this level, it could signal an upward move that would find its main resistance around 1.2180.

In the short term, the movement will depend on the NFP report published today. A strong data could lead to upward momentum for the dollar, at least in the short term, slowing the rise of the EUR/USD pair. If the figure fails to match expectations, the market could continue with dollar sales to support the pair in its current short-term trend.

The Gold market.

Under these circumstances, GOLD could be impacted as well. The recent rise that has overcome critical resistance levels pointing to further gains is reinforced by the current real interest rates below -2% in the United States. An initiation of the tapering process would lower investors' interest in the precious metal, as it benefits from low real interest rates by acting as an investment and hedging alternative.

For now, gold has exceeded the previous high of 1815, pointing towards targets located between the 1850 and 1860 area.

Sources: investing.com, reuters.com.

Share this article

This information prepared by capex.com/za is not an offer or a solicitation for the purpose of purchase or sale of any financial products referred to herein or to enter into any legal relations, nor an advice or a recommendation with respect to such financial products.This information is prepared for general circulation. It does not regard to the specific investment objectives, financial situation, or the particular needs of any recipient.You should independently evaluate each financial product and consider the suitability of such a financial product, by taking into account your specific investment objectives, financial situation, or particular needs, and by consulting an independent financial adviser as needed, before dealing in any financial products mentioned in this document.This information may not be published, circulated, reproduced, or distributed in whole or in part to any other person without the Company’s prior written consent.
Past performance is not always indicative of likely or future performance. Any views or opinions presented are solely those of the author and do not necessarily represent those of capex.com/zaJME Financial Services (Pty) Ltd trading as CAPEX.COM/ZA acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via CAPEX.COM/ZA, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15.  Magnasale Trading Ltd is the principal to the CFD purchased by investors.