Soft NFP Spurs Stock Market

• Last Friday, Soft NFP hammered the dollar to a one-month low.
• Oil prices could be propelled by a truce talk breakdown between Hamas and Israel, while Saudi Arabia plans to raise its crude prices.
• BTC gained more than 12% last week as risk appetite in the market improved.

Market Summary

Last Friday saw a notable weakening in the dollar, with the dollar index (DXY) declining to its monthly low following the underwhelming U.S. Non-Farm Payroll (NFP) report, which significantly missed market expectations. This soft job data has fueled market speculation about a possible interest rate reduction by the Federal Reserve in the third quarter of 2024, consequently dampening the strength of the dollar. In response, U.S. equity markets celebrated the softer job figures, with all three major indexes—the Dow Jones, S&P 500, and NASDAQ—experiencing jumps on Friday, buoyed by the prospect of a looming lower interest rate environment.

In commodities, gold prices rallied from recent lows, benefiting from the weakened dollar. Meanwhile, oil prices found support after hitting a two-month low. The geopolitical landscape in the Middle East added complexity as developments took a sour turn. The anticipated truce between Israel and Hamas did not materialise, with reports indicating that Hamas delegates left Cairo after talks concluded without agreement. Additionally, in response to the soft oil market, major oil exporters like Saudi Arabia are raising their flagship crude prices, and both Iraq and Kazakhstan have announced plans for oil supply cuts.

Looking ahead, the financial markets are poised for further catalysts with the central banks of Australia (RBA) and the United Kingdom (BoE) set to announce their interest rate decisions this coming Tuesday and Wednesday, respectively. Traders and investors in the Australian dollar and the British pound are advised to pay close attention to these announcements and the accompanying monetary policy statements for insights into future monetary policies of these central banks.

Current rate hike bets on 12nd June Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (91.6%) VS -25 bps (8.4%) 

Market Movements

DOLLAR_INDX, H4

Last week witnessed a turbulent journey for the Dollar Index as it reacted sharply to disappointing US economic data. Initially plunging on the news, the dollar saw a swift recovery as bargain hunters stepped in. Notably, Nonfarm Payrolls fell drastically to 175K, well below market expectations, alongside worse-than-expected figures for the US Unemployment Rate and Average Hourly Earnings. Attention now turns to speeches by key Fed policymakers, including New York Fed President John Williams and Richmond Fed President Thomas Barkin, shaping market sentiment in the absence of major economic releases.

The Dollar Index is trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 34, suggesting the index might enter oversold territory. 

Resistance level: 105.70, 106.35

Support level: 105.05, 104.60

XAU/USD, H4

Gold prices remained relatively unchanged after experiencing volatility last week, particularly during the release of the Nonfarm Payrolls and Unemployment Rate reports. Initially, gold saw a significant increase in response to the disappointing US jobs data. However, subsequent profit-taking by investors caused gold prices to retreat to their initial levels. Additionally, market participants are awaiting the outcome of ceasefire negotiations in the Middle East for further trading signals. Talks regarding a potential ceasefire have reached a critical stage, with Hamas reiterating its demands and Israeli Prime Minister Benjamin Netanyahu dismissing them.

Gold prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 57, suggesting the commodity might extend its gains after breakout since the RSI stays above the midline. 

Resistance level: 2310.00, 2330.00

Support level: 2290.00, 2270.00

GBP/USD，H4

The GBP/USD pair capitalized on the weakening dollar, climbing to a two-week high before encountering strong resistance near the 1.2600 level. The surge was primarily driven by the softening of the dollar, following the release of weaker-than-expected U.S. job data last Friday. Looking ahead, traders of the Sterling are poised to closely monitor the upcoming Bank of England's (BoE) interest rate decision and the accompanying monetary policy statement. These will be critical in determining the future trajectory of the GBP/USD pair. 

The GBP/USD was rejected at its strong psychological resistance level above 1.2600, suggesting a lack of bullish momentum. The RSI is buoyant at above 50, while the MACD is flowing flat at above the zero line, suggesting that bullish momentum is easing. 

Resistance level: 1.2660, 1.2760

Support level: 1.2440, 1.2370

EUR/USD，H4

The EUR/USD pair has experienced a rally, but it encountered resistance at the psychological 1.0800 level. This uptrend was primarily driven by a weakening U.S. dollar, which came under pressure following disappointing U.S. job data. Looking forward, traders of the euro will be closely watching the upcoming HCOB Eurozone PMI data. This data will be crucial in assessing the economic strength within the Eurozone and could influence the direction of the EUR/USD pair.

The pair is rejected at below 1.0800, awaiting sufficient bullish momentum to break above such a level. The MACD and the RSI have edged higher, suggesting the pair remains trading with bullish momentum. 

Resistance level: 1.0865, 1.0955

Support level: 1.0700, 1.0630

NASDAQ，H4

The U.S. equity markets, including the Nasdaq, experienced a positive surge following the release of softer U.S. job data. The Nonfarm Payrolls (NFP) reported a gain of 175,000 jobs, a figure significantly lower than the previous reading of 315,000. This underperformance has reignited expectations of a potential rate cut, as investors anticipate that a slower job growth rate could lead the Federal Reserve to adopt a more accommodative monetary policy stance to support the economy. The prospect of lower interest rates in the near future has buoyed market sentiment, contributing to the uplift in equity indices. 

Nasdaq has broken above its near resistance level at 17850 and is climbing toward its psychological resistance level at 18000, suggesting a potentially bullish signal for the index. The RSI is heading toward the overbought zone, while the MACD is on the brink of breaking above the zero line, suggesting the index is trading with fresh bullish momentum. 

Resistance level: 18430.00, 18680.00

Support level: 16970.00, 16230.00 

AUD/USD, H4

The AUD/USD pair extended its gains, propelled by the depreciation of the US Dollar following the release of a disappointing US jobs report. As investors brace for the upcoming week, all eyes turn to central bank meetings, particularly the Reserve Bank of Australia's (RBA) policy gathering. With robust first-quarter inflation data and ongoing labor market strength, the RBA is expected to maintain its current policy stance. However, market participants will closely analyse the RBA's statements for any clues regarding future monetary policy direction.

AUD/USD is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 67, suggesting the pair might enter overbought territory. 

Resistance level: 0.6640, 0.6680

Support level: 0.6585, 0.6540

CL OIL, H4

Despite Saudi Arabia's pledge to raise oil prices for Asian buyers, crude oil prices continued their downward trajectory last week. The main drivers behind this bearish momentum were the easing tensions in the Middle East. Looking ahead, the upcoming OPEC+ meeting on June 1 remains pivotal, with market participants eagerly awaiting decisions on potential supply cuts. Sources within the OPEC+ group indicate a willingness to extend output cuts beyond June if oil demand fails to pick up.

Oil prices are trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 33, suggesting the commodity might enter oversold territory. 

Resistance level: 80.45, 81.90

Support level: 78.00, 75.95