US and European futures are indicating a lower open as traders are still in the process of digesting the most important economic data, the US NFP. The economic number released on Friday in the US really shocked the market and made many investors and traders confused about the Fed’s next monetary policy. The data confirmed that the US labor market is still very much in good shape, and if the Fed wants to increase the rate at the same pace that they have been doing, they can certainly do so.
The number of people employed in nonfarm settings rose by 263,000 during the month, while the unemployment rate remained unchanged at 3.7%, according to data released by the Labor Department on Friday. The employment figure was expected to rise by 200,000, while the unemployment rate was predicted to remain at 3.7%, according to a study conducted by Dow Jones.
The monthly increase was down by a few hundred from the previous month’s ‘figure, which had been revised upward to reflect a higher number. A more comprehensive measure of unemployment that takes into account those who have given up looking for work and those who are working part-time jobs due to economic considerations showed that the jobless rate had inched down to 6.7%.
Over in Asia, we also have seen a slowdown in trading activity on the back of the US NFP number and also the data which came out of China. One of the most important economic numbers, the Chinese Caixin services Purchasing Managers’ Index for the month of November, came in at 46.7, reflecting the lowest result in the last half
a year. Remember, China is the second biggest economy of the world, and an economic slowdown here impacts everything.
The reading for October came in at 48.4, whereas the figure for September was 49.3. This print also indicates the third straight month of contraction in production and new work. The PMI values are taken in order and show the changes in industrial activity from month to month.
At the time that you reach 50, expansion gives way to shrinkage. The data has confirmed that the pace of drop was solid generally, but on the more optimistic side, the slowdown was a lot less as compared to the last wave of Covid-19 cases from March to May.
Oil and OPEC
OPEC quelled all rumors yesterday when it announced that the cartel has no interest in increasing the oil supply. The influential oil alliance confirmed that it will keep its oil supply as it is, which is reducing oil production by 2 million barrels per day until the end of 2023. Some industry experts have been expecting that oil-producing nations may actually reduce their oil supply even more, especially as European Union announces its ban on Russian oil. The EU is expected to ban all oil imports from Russian oil starting today and the G-7, along with the US, impose their price cap on Russian oil as well. Russia has warned that if a price cap is introduced on its oil cap, the countries taking such action will only be cutting into their own flesh as such actions will be met by serious actions by Kremlin.
In terms of oil price action, Crude oil prices continue to trade below the critical price level of $90, and it appears that the new resistance for the price is near the $85 price mark.
What we believe is that if the price continues to fa il above this resistance level, then the path of the least resistance is more likely to be skewed to the downside. Currently, the price of Crude oil is trading below 50 and 100-day SMAs on the daily time frame , which means that it is not bulls that are in control of the price but the bears.
The precious metal has started the week on the more positive side, and this is chiefly due to some softness in the dollar index. The price continues to h
oover near the important support level of 1,800, which we mentioned last week. Traders know that if the shining metal continues to trade above this critical price level, then the chances are that we may actually see further higher highs for the price.
The main fundamental which is influencing the price action of gold is the Fed’s monetary policy and what they will do in the next two weeks as it is then when the Fed will announce its monetary policy.