Another day, another record high for world stocks, as a growing sense of optimism over the global economy boosts risk sentiment. Asian shares ventured higher during early trading on Friday, while European markets opened on a positive note amid the risk-on environment. With the Dow Jones Industrial Average surpassing 25,000 for the first time ever on Thursday, U.S equity bulls are clearly back in town and as such, we could see further gains on Wall Street this afternoon.
Dollar steady ahead of NFP
It is interesting how the Dollar remained stuck near a four-month low during early trading on Friday, despite the stronger than expected data in the United States, boosting expectations of a Fed rate hike in March.
The U.S ADP employment report smashed market expectations, as U.S private employers added 250,000 jobs in December, an encouraging sign from the U.S labor markets. The fact that the dollar still depreciated following the economic release suggests that investors may be diverting their attention elsewhere, namely the upcoming U.S tax reforms. One of the biggest risks the dollar could face this year, is the impact of Trump’s sweeping tax overhaul falling below market expectations.
Today’s main event risk for the dollar will be the non-farm payroll report, which should offer fresh insight into the health of the U.S. job market. With the ADP results steamrolling over market expectations, investors will be paying attention to see if NFP headline figures produce a similarly positive pattern. Although Dollar bulls have entered the year simply missing in action, today’s NFP report could provide a welcome boost. A solid headline NFP figure, coupled with signs of rising wage growth, may offer an opportunity for Dollar bulls to make a late Friday appearance. Alternatively, a disappointing U.S jobs report would likely result in the further downside.
Taking a look at the technical picture, the Dollar Index remains bearish on the daily charts, with sustained weakness below 91.80 opening a path towards 91.55. For bulls to have any chance of charging back into the game, prices needed to break above 92.33 and 92.65, respectively.
Commodity spotlight: Gold
Gold edged lower trading on Friday, ahead of the anticipated U.S. non-farm payroll data release, but remained on track for a fourth consecutive week of gains.
This has been a positive trading week for gold, with a vulnerable U.S dollar and geopolitical tensions in Iran likely factors behind the metal’s appreciation. Gold bulls could be instilled with fresh inspiration to elevate prices higher, if the NFP report disappoints this afternoon. On the other hand, a solid report could spell further declines in the short term, with $1,310 per ounce acting as a level of interest. Taking a look at the technical picture, gold remains bullish on the daily charts above $1300. Bulls need to conquer $1,320 for the metal to witness further upside towards $1,333.