Article / 03 June 2016 at 11:37 GMT

Mid-session Europe: Market counts down to NFP

Saxo Markets


Foreign exchange

European markets traded higher following gains in US and Asia ahead of key US jobs data. 
Other data released earlier showed Eurozone May Final Services PMI at 53.3 vs. 53.1 expected. Germany and UK Services PMI came in better than had been forecast. On the downside, Eurozone April Retail Sales out at 0.0% vs. 0.4% exp. m/m; 1.4% vs. 2.1% exp. y/y.


  • US May Change in nonfarm payrolls (160K exp.) (1230)
  • US May unemployment rate (4.9% exp.) (1230)
  • US May final Markit services PMI (51.4 exp.) (1345)
  • US ISM non-manufacturing comp. (55.3 exp.)(1400)
  • US April factory orders; April final durable goods orders (1400)      

Forex developments

EURUSD: is stuck in a range since May 30 between the 100-day moving average now at 1.1181 area and the 200-day moving average at 1.1095. If we fail to close beyond these levels today to end the week, the risk is we stay in the tight range until the Fed meeting in mid June.

USDJPY: Was slightly below the 50% Fibo level yesterday and today at 108.50 that we had mentioned previously, which shows possible interest to reestablish positions there, any revisiting on weaker NFP could be the trigger to a sharper move down to the other Fibo level at 107.80 area. With the latest developments from Japan, the sense of a lack of urgency in interfering in the exchange rate and this might have us range in the 107.80 to 111 area for a while.

GBPUSD is  still finding support at the 55-day moving average (at 1.4393 today) where it has rested above since June 1. The rate closed roughly below the 1.4415 Fibo level and the 55-day remains the only decent tech support that if taken out can then start us heading towards 1.4338 (Fibo level and around 100-day moving average). Latest Brexit polls suggest 41% Remain and 41% Leave, so ahead of the weekend GBP positions might be unwound to avoid risk of volatility from poll noise. Tech resistance remains 1.45 under these circumstances.

FX Options volatilities
It's been a slow morning with the market waiting for nonfarm payrolls. EURUSD volatility continued to go lower, 3 month is now trading 8.55 down from 9.2 early yesterday morning. 8.4-8.5 is low for 2015-2016, so probably a good base for some buying interest as we are still waiting for Brexit. USDJPY volatility slightly lower today but less degree than EURUSD. AUDUSD volatility also trading lower and would not be surprised to see this continuing.
Historic vs implied vols in all major crosses are expensive, which is normal as we are stuck in ranges until Brexit, the Bank of Japan and the Federal Open Market Committee.

Fixed income

Bunds broke free to new contract highs currently at 164.70 taking the 10-year German yield down below 0.10%. Risk sentiment remains positive though, ahead of crucial NFP numbers later today, which will have a lot to say on June and July policy decisions. Corporate enjoying the tailwind and catching up with yesterday’s losses in a 5 bps contraction move on index level to 316 bps. Weekly Bond Update: Buckle up for intense activity ahead

A rise in commodity prices lifts mining stocks as European bourses remain steady this morning ahead of today’s NFP release.
Shares in Royal Dutch Shell, BP, Total and Repsol all trade 1%-2% higher as Saudi Arabia pledged not to release more oil into the market place despite output agreements not being reached at yesterday's Opec meeting.
BHP Billiton, Glencore and Anglo American trade 2% higher as the price of raw materials rose.
Hotel chain operator Accor was reported in Le Figaro that China’s Jin Jiang was considering boosting its holding in Accor to 29% thus lifting Accor shares by 4% this morning.
Shares in aircraft manufacturer Airbus fell 1.4% as the EASA (European Aviation Safety Authority) grounds Airbus and Super Puma helicopters following the discovery of metal fatigue in the gearbox of a fatal Super Puma helicopter crash.
US equity futures are flat ahead of Non Farm Payrolls which may provide details of a potential hike in US rates.



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Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.

Asia:      Morning Report APAC: Welcome lift for oil boosts sentiment in Asia

Europe: Morning Markets:  USD holds its breath ahead of jobs data

Europe: From the Floor: NFP 'critical' for July hike move

 A protracted strike by Verizon Communications workers may skew the NFP data. Pic: iStock

— Edited by Clare MacCarthy

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