Investors on edge ahead of NFP

April 7, 2017 09:26 AM

A strong sense of unease infiltrated the financial markets during trading on Friday with investors staying clear of riskier assets after reports were released that the U.S military launched an airstrike on Syria. The possible threat of geopolitical tensions heightening from the airstrikes has created a risk-off trading atmosphere which left Asian shares mixed. The lack of upside momentum from Asian markets has already contaminated European equities with the diminishing appetite for risk potentially limiting gains on Wall Street this afternoon. It must be kept in mind that participants were already jittery ahead of the Trump-Xi summit and this fresh development may compound to the horrible cocktail of uncertainty.

Trump-Xi summit round 2 
Although the Trump-Xi summit has been somewhat overshadowed by the U.S. strike on Syria, investors may still pay very close attention to how the meeting between these two world leaders progresses. While Donald Trump has said that he has developed a friendship with Chinese President Xi Jinping, this may be tested today as the two leaders discuss trade, North Korea, and other important market moving issues. A situation where the outcome of the meeting seems unfavorable and unsuccessful could intensify the risk aversion ultimately boosting gold.

NFP in the spotlight 
The solid ADP report and hawkish Fed minutes this week have allowed the Greenback to regain its attitude with the Dollar Index trading around 100.78 as of writing. With short-term bulls simply looking beyond the Trump uncertainties and focusing on positive economic data, the Dollar could be poised for further upside. Investors may direct their attention towards the pending NFP report this afternoon which could offer some insight to how the U.S. labor force fared in March. A blockbuster NFP figure that exceeds expectations coupled with a surprise rise in average hourly earnings could boost the Dollar further. From a technical standpoint, the breakout above 100.75 could open a path higher towards 102.00.

Gold breaks above $1,260 
Gold charged to a fresh 5 month high at $1,269 during early trading on Friday after reports were released that the U.S. military launched an airstrike on Syria which soured risk appetite. With risk aversion set to heighten as markets ponder over the ramifications of the U.S. airstrike, gold and other safe-haven assets may receive a solid boost. While there is a possibility of a positive NFP report pressuring Gold prices, the downside shocks may be limited by the jitters. From a technical standpoint, bulls need a solid daily close above $1,260 for a further incline higher towards $1,300.

Commodity spotlight – WTI 
WTI Crude was propelled towards $52.90 on Friday after the U.S airstrikes on Syria sparked speculations of a threat to supplies. Although the sharp upsurge in prices has turned oil somewhat bullish on the daily charts, the bearish fundamentals remain intact. With the oversupply concerns still a dominant theme in the oil markets, extreme upside gains may be limited. From a technical standpoint, bulls have won the battle this week with prices breaking above $52. For the upside to continue and display sustainability, a solid breakout and daily close above $53 will be needed. In an alternative scenario, bears have a chance to reclaiming control back below $51.

About the Author

Lukman Otunuga is an FXTM research analyst