Markets Are on the Upside Ahead of Non-Farm Payrolls

Markets are tuned positive ahead of the Non-Farm Payrolls release later in the day. The S&P broad market index updated all-time highs at 4311 points, Brent crude prices jumped above $77.0 per barrel, a maximum not reached since October 2018. The U.S. Dollar also posted gains of 0.5%.

Such peculiar picture may be explained by the Non-Farm Payrolls, as investors prefer to stick to the Greenback while pushing risky assets’ prices up too. It is really hard to say if this construct would survive the labor market data release as most of the instruments’ prices are heavily strained from the usual price movements curve. Moreover, statistical modeling of the labor data in the U.S. suggests controversial signals. Thus, Non-Farm Payrolls modeling considering a recent decrease in initial jobless claims by 21,000 gives an overall 690,000-700,000 jobs increase in June, which is close to the consensus figure of 700,000 jobs.

The unemployment levels is much harder to asses after May levels were seen exaggerated. So we may see unemployment in June at a steady 5.8% despite an overall decrease of jobless claims by 300,000 last month. The unemployment level may even edge higher to 5.9% but would hardly decrease to the forecasted 5.7%. Average hourly earnings may also sustain in June at 0.4-0.5% amid lack of the available labor force in the United States as government continue to pay stimulus checks to support American families.

Finally, we may get moderately positive Non-Farm Payrolls report that would show continuous economic recovery in the United States, but, on the other hand would send signals to the Fed to continue its stimulus measures, including massive monthly $120 billion bond purchase program.

In this case the S&P 500 index may renew its all-time highs above 4280 points. Most important in this case to stay sharp as correction risks are extremely high now.

Crude market may also end this week close to three-year highs.

Gold prices would hardly benefit from such report as they would hardly get an impulse to move in either direction. So, the trading range of $1750-1800 per troy ounce may remain intact by the end of this Friday.

Currency market would not benefit from moderately positive Non-Farm Payrolls report. Technically we may say the Greenback is a little overbought and we may expect it lower. The EURUSD is sitting close to the important weekly support levels. Optimal levels for buy positions might be considered at 1.18400-1.18600 with a target at 1.19300. However, such unsuccessful attempts were made yesterday. So, chances of this scenario are now lower.

GBPUSD is below its support level at 1.38400, but the pair is not interesting for opening buy positions.

The USDJPY has surprised the market as it almost reached the level of 111.95, where sell positions would be most attractive. Non-Farm payrolls may provide such a boost opportunity for the pair.