Photo - Andreas Zanin
Andreas Zanin
Analysis, Market Analysis | October 5, 2023

JASPER’S MARKET SQUAWK 05-10-2023

Relief Rally Offers Respite Leading to NFP

Yields stalled after reaching a cycle high following ADP’s cooler-than-expected hiring data Wednesday, offering a sigh of relief leading to the official NFP release, with gains mainly driven by travel and automotive stocks. Oil crashed over 5% on EIA’s gas build, helping ease inflation concerns.

Chart: WTI

Key Factors for Today

  • Oil Sinks Over 5% Following Large Gas Build, US-SA Mega Deal
  • Large ADP Drop Stalls YIelds, Gives EURUSD Breathing Room
  • BOJ Data Suggests No Intervention at ¥150, Remains Volatilite
  • Pound Gains Momentum After UK Services PMIs Upward Revision

Oil Sinks Over 5% After EIA Reports Large Gas Build

Oil prices experienced a steep drop not seen in over a year despite the EIA showing a 2.2M barrel build in crude stocks and confirmation from OPEC to maintain production levels as gasoline inventories added 6.5M barrels. WTI plunged 5.6% to settle at 85.81, erasing gains made since Saudi Arabia and Russia’s pledge, with next support at $82 and resistance at $86 a barrel. Meanwhile, a US-SA mega deal is brewing in the background, weighing on sentiment.

Large ADP Drop Gives EURUSD Some Breathing Room

Private payroll growth in September was significantly lower than the 153K expected, with job growth totalling just 89k, indicating a potential cooling in the labour market. It comes after a sharp rise in job openings on Tuesday, easing recent concerns until the NonFarm Payrolls shed more light. The dollar stalled, assisting EUR/USD bulls to bounce off further from the low of $1.045 and reclaim $1.05 despite worse-than-expect Retail Sales and mixed PMIs in the EU. The move was partially supported by ECB Lagarde’s hawkish stance and cooler ISM Services in the US. $1.0556 is expected resistance higher up.

BOJ Data Suggest Bank Has Unlikely Intervened at ¥150

The BOJ’s money market data suggested that Japan probably did not intervene in markets earlier inthe week, with Thursday’s projections aligning with expectations excluding intervention, at a 10 billion yen surplus. Despite the dollar ending broadly lower on Wednesday, USD/JPY closed the session mixed as traders entered a battleground without expected pressure from -at least- the BOJ, but volatility remains elevated. Eyes are on ¥147.87 and ¥149.58 next.

UK Services PMIs Still in Contraction But Revised Up

The final print of the S&P Global Services PMI fell to 49.3 in September, below the 50 expansionary threshold but higher than the preliminary reading of 47.2. Along with the pause in the dollar’s rally, GBP/USD rose for the first time since last Thursday to lay eyes on $1.22 next. Above there, resistance is settled by $1.2237, with support exposed at the March low of $1.2036.

On The Docket

  • German Exports
  • French Industrial Production
  • UK S&P Global/CIPS Construction PMI
  • ECB Lane Speech
  • US Trade Balance
  • Initial Jobless Claims
  • Fed Mester Speech
  • ECB De Guindos Speech
  • Fed Bakin Speech
  • Fed Daly Speech
  • Fed Barr Speech

FX 1-Day Relative Performance (USD)

  • Aussie and Kiwi Upbeat, 0.67% and 0.56% up
  • Euro 0.17% up, Sterling higher at +0.19%
  • Yen 0.40% higher, Swissy 0.31% in green
  • Canadian dollar also up vs USD , at 0.17%
  • Gold 0.37% higher, Silver leads at +1.27%
  • Crude up by 0.4%, Brent higher at +0.48%
  • Natural gas futures up by 1.65%
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