The data on activity and US labor market are competing for investors’ attention. Measures of activity in business have already shown a steady and even somewhat surprising positive development indicating some macroeconomic stabilization at first, but also giving hopes of recovery recently. The first releases for June confirmed a sizable improvement in industries in Japan and the UK and the Chinese PMI remained above a 50 points threshold for the third month in a row. If this proves to be the case also for the US (the ISM release is scheduled for today), markets will get the picture historically associated with economic recoveries and early stages of (stocks) bull market. Payrolls report will traditionally attract a lot of attention. Already the data for April had shown an improvement here and although a labor market gives rather lagging responses, investors certainly would welcome another positive surprise on this field. In both previous releases a market reaction was influenced by previously released ADP
report (Wednesday) so it should be watched carefully. On top of this, we face couple of central banks meeting – Bank of Australia on Tuesday, and Bank of England, ECB and Bank of Canada on Thursday. No changes to interest rates are expected, but the market may use those opportunities to move on technical levels.
What is interesting, markets did not wait for all those potential drivers and started action right from the start of European trade. In fact some signals of such developments were sent already on Friday, especially on the EURUSD. The pair advanced through a prior resistance of 1,4050 and touched 1,4166. Today the rise continues as the pair benefits from improved sentiment on stock markets. A break through a resistance at 1,4180 opened a path to 1,4360 and potentially to as high as 1,4717. The situation on the EURUSD is very supportive to developments on the GBPUSD which has already been trending for a while. The pair moved up to 1,6430 – a resistance indicated by the 38,2% retracement of the whole bearish wave from November 2007 – January 2009. Even though further rises on EURUSD are very likely to spur additional buying on the GBPUSD, the pound looks extremely bought off at the moment and some correction cannot be excluded.
Another crucial development initiated on Friday is a climb of the S&P500 index. Stocks were in demand already at the end of Friday’s US session and the Asian trade brought a continuation of this move. The crucial move took place at the opening in Europe when futures on the S&P500 went up to 932 points, above previous peaks in May (which so far seemed to be defended quite well). This is certainly a buying signal and it will be reinforced if January’s peaks (at 941,5 pts.) are conquered too. Opportunities are abundant.
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Przemysław Kwiecień  |
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