Dollar bulls seek NFP lifeline

Global Markets

Stock markets received a slight uplift during trading on Thursday, although this has nothing to do with an improved sentiment towards the global economy, but a sharp depreciation in the value of the Dollar. Asian equities opened noticeably shaky on Friday with the Nikkei sinking -1.32% as concerns mounted in the Japanese markets over the possibility that the Dollar would weaken further against the Yen. Although European and American equities grasped the opportunity to conclude positively on Thursday based on Dollar weakness, an air of caution ahead of the anticipated NFP report today may result in a lower open with prices depressed.

FTSE100 under 6000

The violent swings in the oil markets combined with ongoing concerns about the global economy have reinstated a wave of risk aversion which continues to punish the FTSE100. The Index is bearish on the daily timeframe and despite the bounce in mining stocks which sent prices higher; bearish investors may use this relief rally to send the FTSE100 lower towards 5700. From a technical standpoint, prices are trading below the daily 20 SMA while the MACD has also crossed to the downside. A breakdown below 5800 should encourage a further decline to 5700.

BoE unanimously keeps rates unchanged

Sterling bears acquired inspiration during trading on Thursday following the Bank of England’s unanimous decision to keep rates unchanged which renewed fears about the current health of the UK economy. The economic landscape has deteriorated considerably since the start of the year and as such has forced the BoE to cut inflation outlooks once again, while growth for 2016 was slashed to 2.2% compared to the previous 2.5%. Sentiment remains firmly bearish towards the Sterling and with very little incentive provided to raise UK rates anytime soon; sellers may use this to attack the Sterling across the board.

WTI bears still present

WTI Oil peaked to $33.50 during trading on Thursday as dollar weakness removed some downwards pressures towards prices. Regardless of recent gains, this commodity is fundamentally bearish and the dwindling expectations of an emergency OPEC meeting coming forth has obstructed any recovery in prices. Oil stockpiles continue to increase incessantly which has haunted investor attraction while the visible conflict of interest between OPEC members suggest that low oil prices are here to stay for an extended period. With Iran expected to unleash more oil into the heavily saturated markets, sellers may be encouraged to attack prices lower towards $30 and potentially lower.

Gold continues to surge

The heightened concerns over slowing global growth combined with violent movements in the oil markets have reinforced a wave a risk aversion which has consequently boosted appetite for safe-haven assets such as Gold. This yellow metal is heavily bullish and the fading expectations that US rates may be increased in 2016 have provided an opportunity for bulls to install a round of buying momentum. If NFP on Friday fails to meet expectations, bullish investors may use this opportunity to send Gold towards $1160. Technically prices are trading above both the 20 and 50 SMA while the MACD has crossed to the upside. Previous resistance around $1140 may become a dynamic support which should encourage a further incline towards $1160.

NFP in focus

Investors may turn their focus towards the critical NFP release today which has the potential to determine if US rates still have some chance of being raised at all. Since the start of the year, the majority of US economic data has been soft, while the tepid GDP report for Q4 dealt a heavy blow to sentiment. If NFP exceeds expectations today then USD bulls may be provided a lifeline as investors renew bets on the likelihood of US rates being hiked in 2016.

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Otunuga is a research analyst at FXTM