We might see the second COVID-19 pandemic wave of infections put a damper on global and U.S growth prospects ahead of the Payrolls report this Thursday the 2nd of July 2020. The payrolls and initial jobless claims will be moved one day earlier due to the 4th of July weekend celebrations.
The second quarter is underway and the U.S Markets are on a roll with the S&P.
In this note we take a look at the US economic data and Wall Street 30 technical setups.
FOMC meeting minutes
Another Jam-packed week with economic data in the U.S as the FED’s meeting minutes is also set for release later tonight, 1 July 2020 at around 20:00 SAST. FED chair Jerome Powell testified before the House Financial Services Committee yesterday the economy is showing signs of recovery. Powell emphasized the fact that the coronavirus pandemic will present new challenges and the path ahead for the economy remains “extraordinarily uncertain”.
U.S Jobless claims
Remember the initial Jobless claims will be released at the same time as the jobs report so expect an increase in market volatility on Thursday 14:30 SAST.
We have seen historic levels reached in unemployment but have also seen these numbers decline over the past weeks. Analyst consensus is that this week’s U.S Jobless claims should come in at around 1.3 million which is lower than the previous weeks 1.4 million jobless claims.
Chart - Weekly U.S jobless claims
US ISM Manufacturing Purchasing Managers Index (PMI)
The ISM Manufacturing PMI number is expected to close in on the 50 mark at 49.5 which is higher than the previous reading of 43.1 as lockdown measures are eased across the U.S. a close eye will be kept on seasonal factors within the Manufacturing sector. The data is expected to be released today the 1st of July 2020 at 16:00 SAST.
Chart - The ISM Manufacturing PMI
U.S. ADP Non-Farm Employment Change
The ADP Non-farm Employment Change is also expected to surprise to the upside to 3 million for the month of June 2020. The data is expected to be released today the 1st of July 2020 at 14:15 SAST.
The U.S. ADP Non-farm Employment Change is an excellent predictor of the Non-Farm Payrolls report as the ADP Non-Farm Employment Change measures the monthly change in non-farm, private employment. The U.S. ADP Non-farm Employment Change is released two days ahead of the NFP jobs number.
Chart - The U.S. ADP Non-farm Employment Change
Non-Farm Payrolls (NFP) outlook
The number of new Non-Farm jobs for June is expected to inch higher and remain in positive territory, with the number expected to come in at 2.9 million from the previous month's surprise of 2.5 million Non-Farm jobs.
The Average hourly earnings (M/M) number is expected to go into negative to -0.7% from the previous months -1.0% and the Average hourly earnings (Y/Y) is expected to decrease to 6.7%
U.S. Unemployment Rate:
The U.S. Unemployment Rate measures the percentage of the total workforce that is unemployed and actively seeking employment during the previous month. The U.S. Unemployment Rate is expected to show a decrease from the previous reading to 12.3%.
Why is the jobs number important?
The Non-Farm Payrolls report (NFP) is treated as an economic indicator for people employed during the previous month, and the number being released will have a direct impact on the markets. In the United States, consumer spending accounts for most of the economic activity, and the Non-Farm Payrolls report represents 80% of the U.S. workforce. Farmers are excluded from the employment figures due to the seasonality in farm jobs.
Technical Analysis outlook on U.S. Indices for the U.S Non-Farm Payrolls (NFP)
Wall Street 30
The Nasdaq and S&P 500 have been on a roll over the last quarter which has seen the Nasdaq push to new highs leaving the Dow in a pile of dust. The Wall Street 30 Index has been consolidating over the last couple of weeks which could signal a breakout in either direction.
Our Wall Street 30 Index outlook from last week mentioned some important levels to take note of while the Index remains subdued, for now. The 50-day SMA is acting as support and will be watched closely if it can remain intact to support higher prices.
Keep an eye on the FED minutes as fundamentals should support a move in either direction, but if we do see a break of support at 24545 (pink line) then sentiment should favour the bears. For a move higher the Dow needs to close above major resistance at our previous target price of 26721.
Technical points to look out for on the Daily Wall Street 30:
- The 50-day SMA (blue line) is currently the level to watch on the daily chart which needs to hold to support another move higher.
- The Relative Strength Index (RSI) has moved lower from overbought levels and is stalling at the 50 which indicates indecision.
- The golden ratio has been tested and should also be considered with the 50-day SMA to act as support if the price action momentum starts to falter.
Chart - WallStreet30 Daily
Take note: The outlook and levels might change as this outlook is released during the current days (Wednesday the 1st of July 2020) U.S Market open.
What to trade internationally:
- Major indices to look at will be the S&P 500, Wall Street 30, Nasdaq 100
- Major Forex pairs to look at will be EUR/USD, GBP/USD and USD/JPY
- Commodity to look at will be Gold.
What to trade locally:
- Index to look at will be the ALSI
- Forex pair to look at will be the USD/ZAR
- Rand Hedges (BTI, CFR) and Rand Sensitives (Banks and Insurers)
There are many ways to trade the Non-Farm Payroll (NFP) report, and here are a few strategies traders look at:
- The Early birds: traders who will take an early position before the jobs number is released in anticipation that the directional movement the event will cause will be in their favour.
- The Scalpers: as the data is released, these traders will scalp and try and capitalize on the volatility that is created by the data, positively or negatively.
- The calm and calculated: as the market digest the results of the Non-Farm Payroll (NFP) report and after the volatility swings have occurred, these traders will take a position on the momentum of the market.
When and what time is the US NFP (Non-Farm Payroll) announced in South Africa?
Non-Farm Payrolls are usually reported on the first Friday of the month, whereby the number of additional jobs added from the previous month is released. The US Non-Farm Payroll number will be released locally one day earlier this month on Thursday the 2nd of July 2020 at 14:30 SAST.
Sources – Bloomberg, The Washington Post, Koyfin, Investing.com, MetaTrader5
Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by Barry Dumas, Market Analyst at GT247 (Pty) Ltd t/a GT247.com (“GT247.com”) as general market commentary, and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. GT247.com does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information which we receive from third party data providers. You must rely solely upon your own judgment in all aspects of your trading decisions and all trades are made at your own risk. GT247.com and any of its employees will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice. Past performance is not necessarily an indication of future performance. The value of a financial product is not guaranteed. The value of a financial product can go down or up due to various market factors. The graphs are for illustrative purposes only.