Day Trading on good US Labor Market News

Day Trading on good US Labor Market News

Last Friday, the official data on the unemployment rate in the United States for July was announced, giving a rather good picture of an important parameter of the world’s largest economy.

Labor Market. US unemployment at lowest point since February 2020

With a small additional drop from the previous month, unemployment reached 3.5% (from 3.6%) which represents 5.7 million unemployed and it is worth noting that this is the lowest rate since February 2020 – that is, before the sharp jump brought by the health crisis of Covid 19 up to the almost unreachable under normal conditions 14.7%! (April 2020).

Equally good was the announcement of the same day for the new jobs (Employment Change) at +528K, much higher than the forecasts which were below half (+250K) for the specific report.

Dollar gains 0.86% (average) against the rest of the “Big8”

The FOREX market on the same day (5/8) responded particularly positively for the dollar with its rate against the remaining seven major currencies rising significantly. Below is a breakdown of the closing rates on Friday night and in parentheses the daily gains (+0.86% on average) of the Dollar after the positive announcements by the Bureau of Labor Statistics on the American labor market:

Eur/Usd: 1.0180 (+0.63%)
Usd/Cad: 1.2934 (+0.55%)
Usd/Jpy: 135.02 (+1.64%)
Gbp/Usd: 1.2067 (+0.74%)
Nzd/Usd: 0.6240 (+0.90%)
Usd/Chf: 0.9616 (+0.76%)
Aud/Usd: 0.6910 (+0.82%)

As you can easily see in Usd/Jpy there was the biggest rise which is normal from the point of view that after the highs of July when the exchange rate almost touched 140 there was a prolonged period of significant decline so Friday’s fuel seems to have come to act as a catalyst for the continuation of the upward trend since last March in this pair.

Day trading: Good chances on Monday 8/8 for another Dollar rise

In the same logic – which may be of interest to some of the day traders – the scenario of a new further rise next Monday, August 8 for the American currency gathers good possibilities.

Specifically, my analysis focuses on the last two times when the monthly unemployment index performed better than the previous announcement and at the same time also than the forecasts (I note here that the given forecast for July was 3.6% slightly more pessimistic than the reality).

Those two times – in the recent past – were for February and March 2022 unemployment where the US dollar subsequently outperformed for the next trading day against most of the 7 currencies above.

Probability assessment, not prediction

Things look even better (following the philosophy of this pattern which is of course a simple probability assessment and in no way a “prediction” in the classical sense of the term which is anyway only acceptable in fortune telling and… astrology) for USD against the Japanese Yen and the Euro with average gains for both “rivals” at 0.50%.

Labor MarketWhat can we expect next week?

In a recent article I had wondered if the time for buyers in Gold was approaching and since that day the price has bitten almost 2.80% confirming my suspicions of an uptrend in the near future.

The strengthening of the Dollar data described above (which, however, is not all good, I remind you that the American GDP has entered a “technical recession”) may put a brake on this movement since many investors will again start to prefer the monetary shelter of stronger currency abandoning the precious metal to hedge against further swings in markets where medium-to-long term forecasts still show dark clouds on the horizon.

From a technical analysis point of view, however, the fact remains that Gold successfully retested the support of $1680 and that there is no intermediate resistance until $1870, so its movement in the coming weeks will depend more on the risk appetite of traders and the preferences for what it is safer for some investors, the dollar or gold? Only reality itself can answer us…

Until next time I wish everyone good trading!


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