Greenback gains after impressive US jobs numbers

World markets rose today after going through two days of sharp declines. The markets gained ahead of key employment numbers from the United States and a speech by Fed chair, Jerome Powell. In China, the A50 index and the Shanghai Composite index rose by 2% and 3% respectively. In Europe, the DAX and the Stoxx gained by 2% while US stocks pointed to a sharp increase. A major outlier was Japan’s Nikkei, which declined by more than 2% on growth fears.

The USD jumped sharply after the Labor department released impressive employment numbers. In December, the economy added 312K jobs, which was almost double the 178K investors were expecting. It was also higher than November’s 176K.  The participation rate increased to 63.1% while the unemployment rate increased to 3.9%. Private non-farm payrolls increased to 301K. This was a sharp increase from the 173K released in December. Traders will now focus on the speech by Jerome Powell and Raphael Bostic.

In Europe, data from Eurostat showed that inflation cooled to 1.6%. This was the weakest growth in eight months. It was a sharp decline from November’s 1.9%. The reason for the falling inflation was the declining oil prices. From October until December, oil prices declined by more than 40%. In addition, the costs for industrial producers declined by 0.3% between October and November. This was after rising by 0.8% in the previous month. In Germany, the unemployment change contracted by 14K, which was better than the expected contraction of 12K while the unemployment rate remained unchanged at 5.0%. The German composite PMI of 51.6 was weaker than the consensus estimates of 52.2.

In the United Kingdom, mortgage approvals in November shrunk to 63.7K, which was lower than the estimated 66.5K. The net lending to individuals in the month was 4.4 billion pounds, lower than the estimated 4.9 billion pounds. On a positive note, the services PMI in December rose to 51.2, which was higher than the consensus estimates of 50.7. In Canada, the employment change in December increased by 9.3K as the unemployment rate remained at 5.6%.

XTI/USD

The price of crude oil gained sharply after API data showed a drawdown of more than 4.5 million barrels in the past week. The price of the US benchmark rose to an intraday high of $48.50. This was the highest level since December 18. The price is above the 50-day and 25-day exponential moving average. While the RSI is closer to the overbought level of 70. While the upward momentum could continue, traders should be concerned about the lower volumes. This could be an indication of a false breakout. Traders will now focus on the official EIA numbers, which will be released later today.

EUR/USD

The EUR/USD pair declined sharply after the impressive employment numbers from the United States. The pair reached an intraday low of 1.1360 and then moved up slightly as traders tried to interpret the jobs numbers. On the hourly chart, the pair is below the 50-day and 25-day moving averages but is still higher than where it started the year at. The pair will likely remain at these levels as traders wait for the speech by Powell.

USD/CAD

The USD/CAD pair remained lower after the impressive economic data from the US and Canada. The pair remained below the equidistance channel shown below. It was also below the 50-day and 25-day EMA while the RSI moved to below the oversold level. There is a possibility that the pair could resume the upward momentum although traders will continue focusing on the speech by Jerome Powell.