• US major indices made decent gains yesterday erasing some of incurred losses the day before
  • NZ dollar pares all its gains it made following the rosy labour market report, RBNZ meeting looms
  • API reports the second draw of oil stocks in a row, both grades of crude are trading higher

The dust after heavy declines on Monday already settled and Wall Street was able to retrace some of losses during the yesterday’s session. The SP500 (US500 on xStation5) climbed 1.7%, the NASDAQ (US100) rose 2.1% and the Dow Jones (US30), which was afflicted the most on Monday, added as much as 2.3%. The bond market has also settled down as the US 10Y yield is trading just a few points below a 2.8% mark. However, despite decent rises on Tuesday Asian investors have not shared the same extent of optimism, this is especially true when it comes to the Chinese indices. The Shanghai Composite (CHNComp) is losing 1.8% at the time of writing while the Hang Seng is tumbling 1.5%. On the other hand, the Japanese NIKKEI (JAP225) closed just 0.16% higher on the day while the Australian benchmark went up 0.75%. Taking a quick look at the US500 chart below one may notice that the price has already tested a crucial support line in form of 200DMA which served as the support for bulls just after the US presidential election.

link do file download linkThe US500 has stayed above the 200DMA so far which could bode well for bulls going forward. Nevertheless, the price has failed to break above the first more important resistance at around 2680 points therefore one cannot rule out yet another pullback before resuming an uptrend. Source: xStation5

Moving to the FX market we may notice that the Antipodean currencies are among the weakest ones in early trading on Wednesday despite a risk-on mode seen in the US stock markets. Over the Asian session we knew the incredibly rosy New Zealand jobs report which shored up the kiwi immediately. However, the NZ dollar has been unable to hold those gains for longer and right now it’s losing roughly 0.5% against the greenback.

link do file download linkThe NZ labour market report showed the noteworthy acceleration in wage growth. Source: Macrobond, XTB Research

The report showed the unemployment rate fell from 4.6% to 4.5% while a rise to 4.7% had been anticipated whereas employment grew 0.5% qoq beating the consensus at 0.4% qoq. Looking at a year-over-year basis there was a pick-up in employment by 3.7% following a stunning 4.2% in the third quarter of the past year. The largest surprise came from wages though as average hourly earnings climbed 0.8% qoq after the pick-up by 1.2% qoq seen in the previous period of time, the figure smashed the street’s call at 0.5% qoq as well. One may conclude that it was the second back to back so robust employment report which could prompt traders to lift their forecasts as far as the first rate rise is concerned. Finally, bear in mind that the RBNZ meets today evening which could carry some repercussions for the NZD even as no changes in rates are forecast.

link do file download linkThe NZDUSD seems to be trapped within a range between 0.74 and 0.72 and until the price breaks one of these levels, more vigorous moves might be contained. That said, the best strategy could be buying in the vicinity of 0.72 and selling close to 0.74. Source: xStation5

Better moods in the US morphed into rising oil prices, both grades are trading ca. 0.8% at the time of writing. The commodity got an additional boos from the weekly API report which showed an unexpected draw in oil stockpiles (-1.05 million barrels) while a slight rise had been forecast. Moreover, gasoline inventories also shrank by 0.23 million barrels, distillate stocks grew 4.55 million barrels though. Today the EIA will release its own calculations.