Equities Feel The Heat, Australia’s Employment And US Claims

Equities Feel The Heat, Australia’s Employment And US Claims | Technical Analysis

The FOMC allowed market participants to understand that they could start tapering the asset purchase program already this year, as the economy is showing good resilience. The Asian morning kicked off with Australia delivering its employment figures for the month of July. The US will also release its usual labor-related economic numbers, as it does every Thursday, and that’s the initial and continuing jobless claims.

Indices Get Shaken Up A Bit

Yesterday, it was quite an unclear day in the equity markets, as major indices ended their sessions on the mixed side. The top three US indices lost around a per cent each, however, for now, this might be seen just as a temporary correction, before another possible upmove. But market participants are concerned over the fact that the indices seem to be slightly overstretched to the upside, however, the world’s major economies continue to battle the pandemic downturn, as businesses try to stay afloat. Most governments are supporting their economies, by providing financial support in various forms. The developed countries continue to show price stability and strong labor market data.

But exactly these good indicators are starting to make investors worry, as this could force major central banks to start cutting their stimulus packages for the domestic economies. This is exactly what was delivered in the minutes, released by the Fed yesterday. The FOMC allowed market participants to understand that they could start tapering the asset purchase program already this year, as the economy is showing good resilience. According to the Fed, the progress towards full employment is on a slower pace, but price-stability goals have been achieved. This news could force market participants to partially start taking profits, in order to safeguard what had already been achieved. But as we said before, this could be a temporary occurrence, as overall, there are no clear indication for the markets to sell off yet.

S&P 500 — Technical Outlook

Despite the recent declines, overall, the S&P 500 continues to trade above a medium-term tentative upside support line taken from the low of March 4th. If that trendline continues to provide support, we will stay positive, at least with the near-term outlook.

As discussed above, if that upside line continues to do its job and provides support, the index may get picked up by the buyers again, leading to a move back up. If so, the S&P 500 might travel back to the 4417 obstacle, a break of which could clear the path towards the 4437 area, marked by an inside swing low of August 16th.

On the other hand, if the aforementioned upside line breaks and the price falls below the 4337 area, marked by the inside swing high of July 20th, that might spook the remaining bulls from the field for a while. Such a move could open the door for a move to the 4288 obstacle, or even to the 4232 level, marked by the lowest point of July.

Australia’s Employment And US Job Claims

In terms of economic data releases today, it will be a relatively quiet day today. The Asian morning kicked off with Australia delivering its employment figures for the month of July. Australian unemployment number was able to beat both the forecast and the previous reading, showing up at 4.6%, which is nicely below the previous 4.9%.

EUR/AUD — Technical Outlook

EUR/AUD is still moving strongly higher, while trading above a short-term tentative upside support line taken from the low of August 11th. This morning, the pair found resistance near the 1.6300 barrier and stalled below it. If that hurdle continues to provide support, we might see a small correction to the downside. That said, if the above-mentioned upside line continues to hold, the near-term trend could remain to the upside.

As mentioned above, if the pair corrects a bit lower from the 1.6300 territory, it may end up drifting back down, closer to the aforementioned upside line. If that line stays intact, we might see another upmove, as the buyers could take advantage of the lower rate and push it north again. EUR/AUD may once again rise to the 1.6300 obstacle, a break of which could set the stage for a move to the 1.6365 level, marked by the high of December 8th, 2020.

Alternatively, if the pair breaks the previously mentioned upside line and then falls below the 1.6152 hurdle, marked yesterday’s intraday swing low, that could attract more sellers into the game. EUR/AUD may then drift to the 1.6117 obstacle, or to the 1.6085 zone, which is the high of August 16th. If the slide continues, the next potential target might be at 1.6038, marked by the low of August 16th.

The US will also release its usual labor-related economic numbers, as it does every Thursday, and that’s the initial and continuing jobless claims. The initial ones have been missing their forecasts towards the worse side, as the number has been coming out higher or the same since the beginning of July. The current expectation is for another drop, to go from 375k to 363k. If that’s the case, market participants might take it as a positive, which could help improve the overall market sentiment. The continuing jobless claims figures have been performing slightly better than the initial ones. The current expectation is for a lower number than the previous. The forecast stands at 2800k and the previous reading was at 2866k.

As For The Rest Of Today’s Events

The US will also release their Philadelphia Fed manufacturing index for August. The number is expected to improve slightly, going from 21.9 to 23.0. Let us remind the readers that a number above zero shows improving conditions.

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