US labour report preview 02.08.2019

What is supposed to be the main course of day could turn out to be nothing more than a small starter in the light of everything that’s going around on trade and geopolitics in this world.
But traders we are so we will be looking for a direction, not losing out of sight that later tonight Potus will be out with a statement on US-EU trade. It’s supposed to be about Us beef imports into Europe but cars, energy and digital taxes will never be far away. He may give Fed another slap too while he’s at it, he loves them….

Taking all into account, I’ll be looking at the report as one package acting as an accelerator or a brake on yield curves, commods and sentiment.

  • If we get a weaker report, we’ll see more pressure on already very depressed yields, risk and more pressure on the Fed from Trump.
    We may be in for a bloody Friday.
    USDJPY hangs just above its 106.75/78 support for instance and the weekly candle looks ugly. There are a few barriers rumoured in the market at 106.50 and 106.00 which could be easy prey for the blood hounds.
    JPY and CHF crosses are down in the cellar but not showing signs of any rebound worth of the name. A further deterioration seems inevitable if US data show weakness.
    It may give some relief to the EURUSD and Cable, let’s say 0.5% each roughly but both EUR and GBP struggle with their own problems, hence I would rather be looking for lower crosses.
    I will leave EURCHF alone personally as we never know when SNB Jordan would see fit to put on his shoes for a game.
    EURJPY in turn I would be looking at reactions at 118.00. If a break we get 116.60 and possibly even the 2017 low 114.85 could be looking closer as the market is definitely in a bad mood.
    A bad one could also see the shiny metals go for a decisive break higher in this risk off environment. Gold having held 1400 yesterday before any tariff announcement was a sign. Through 1450 we could see a runner. Silver ditto if we break back through 16.40.
  • If in turn the report is stronger than expected, we may get some temporary relief ahead of Trump’s speech on European trade later.
    I could see USDJPY make its way back up to 107.20/50 for instance and see USDCHF pick up towards 0.99s again. EURJPY could have a look at 119.20/30 and EURCHF come a little closer to 1.10 again.
    But… with the sentiment reigning in this market, a good one will put more pressure on the weak currencies: EUR, GBP, AUD and EM currencies should suffer.
    EURUSD recovered some from the lows but with the whole German yield curve sub zero and the European indices dumping at the same time, a better US report could be the trigger to test or break 1.10. There are barriers there, it is a psychological level and there may be a fight put up but when the market smells blood, with a dovish ECB and weak Eurozone data, it could go at least temporarily before some sort of short covering into the weekend perhaps.
    Cable is another one. Bojo has lost one more supporter in Wales overnight, UK-EU Brexit talks are a deaf man’s affair and BOE put up a less than comforting performance yesterday, just trying for the market to remain relatively calm by refusing to admit to possible rate cuts and worst case scenarios. If we get a positive USD report, I’m not excluding a thorough test of the 1.20.
    AUD has been gradually weakening for various reasons and hangs right at the bottom after US’ extra tariff slap on China. A USD positive report could break it and we may be in for a 0.6660, even 0.6600 test if the Gods go crazy.
    EM… well even being mostly high yielders, no reprieve as trade shenanigans are weighing and most of the local CB’s are also looking to cut rates. We could see an add-on to yesterday’s rallies in USDMXN, USDZAR, USDRUB.
    The shiny metals will see a “sympathy” retracement but rather than vs USD, I see gold and silver remain bid vs the weaker lot.
    Watch 1411-17 in gold and 16-15.95 in silver as supports.

That’s my 2 pennies on this afternoon’s US report to come.
I am still bearish on EUR, GBP and risk crosses. I was short EURJPY, covered it yesterday but re-entered smalls today as the global picture looks ugly. Japan-South Korea is just an addition to all the rest and now Nato is getting involved with Russian missiles.
Been riding the short slide cable as well. Looking for either 1.2070-1.2170 to hold/ break.
Watch those yields, stocks and commods. FX will be affected.
And if nothing moves, well then I will go VERY light into the weekend. Politicians and negotiators can throw it all around before we open again on Sunday night

As usual stay safe and happy hunting!

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