A Quiet Start

Daily Analysis - 07/09/2015

US and Canadian Markets Closed Today for the Labor Day Holiday


With the US and Canadian markets closed, the economic calendar is relatively quiet with no major news releases scheduled for the day. Trading is expected to be subdued and largely limited up to the European trading session for the most part. Chinese markets open today after a near-week long holiday last week.

US Unemployment Rate Falls

The monthly payrolls report for August was a mixed bag but deemed to be positive overall. With the exception of the lower number of jobs created, the August payrolls was strong as the US unemployment rate fell to 5.1% and stands just 10 basis points short of the Federal Reserve's NAIRU of 5%. Average hourly earnings also increased to 0.3%, from 0.2%. The number of jobs created in August fell short of estimates of 215K, instead rising by a meager 173K near the low end of the consensus range. However, this weak print in jobs was expected by and large by the markets due to seasonal adjustments and is expected to be revised higher. The previous two month's payrolls numbers were also revised higher by a total of 44K jobs added. EURUSD closed Friday’s session at 1.1160 and looks pressured to the downside in the near-term following last week’s commentary from ECB President Mario Draghi.


Canadian Dollar Consolidates

Canada's jobs report for the month of August showed the unemployment rate rising to 7.0% from 6.8% on the back of a worsening outlook for the energy patch. At the same time the economy added 12,000 jobs. The job gains in August marks the first instance of back-to-back job gains for two consecutive months after the economy's labour market took a hit following the decline in international crude oil prices. The mixed jobs report comes as the Canadian economy is struggling with weak GDP growth amid the downturn and deflation evident in commodity prices. The Bank of Canada will meet later in the week to determine interest rates but the median consensus estimates that the Bank of Canada will keep rates unchanged at 0.50%. USDCAD remains mired in a sideways trend, trading between highs at 1.3340 and lows at 1.3160.


Crude Oil Retreats

WTI Crude oil futures contracts for October eased back from the highs above $49.00 last week as the weekly EIA crude oil inventories report showed a build up in commercial crude oil stockpiles. However, prices were buoyed by the Baker Hughes weekly rig count which showed that the total amount of operational drill rigs decreased for a sixth-straight week, with 622 rigs still producing. Prices rallied but failed to rise above the previous highs of $49.00 and instead posted a lower high at $47.95 with immediate support appearing at the $44.20 level. Prices are currently consolidating within a large bullish triangle pattern, which signals a potential break out to the upside if validated, with a projected target to as far as $55.60. To the downside, there is a strong support level near $44.20 - $43.66, which is broken could see a new leg of declines in WTI.


Dow Jones Shooting Star Technical Pattern

The Dow Jones Index closed Friday with losses of -1.65% or about 269 points lower. The bearish close in prices has confirmed the shooting star bearish reversal candlestick pattern highlighting expectations for further downside in US stocks. Support is at 15,651, marking the lower close on August 25th and taken in context, the shooting star pattern showed a reversal near the 38.2% retracement level of the previous declines from August 18th highs of 17,511.34 and August 25th lows of 15651.24. With China back to business after a near week long holiday, the markets will no doubt remain cautious. The US equity markets are closed today on account of the US Labour Day holiday with only the Dow futures open for trading. At the time of writing, the Dow futures are attempting to retrace higher, trading near 16221. A daily close above 16338 could potentially see a sharp reversal to the upside, invalidating the bearish bias.


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