A1 Trading Company

February 1, 2024

Covering BoE and US Jobs Data

Frank Cabibi

Rates stayed the same in the UK, as expected. US unemployment claims came in hotter than expected with lower ADP NFP yesterday and NFP tomorrow. Here are some trade ideas for the pound and dollar around BoE sentiment and US jobs data this week:

EdgeFinder Analysis

GBPAUD is the strongest bullish reading on the EdgeFinder as of now. At +9, almost all categories point to a stronger pound over the Aussie. The pair has been on a strong uptrend since the start of the year and may continue to rise after the recent Bank of England meeting.

The bank's policy is similar to the Fed's in that they aspire to reach the 2% target on inflation, and they expect their economy to see some growth in the coming quarters. Price and wage inflation are falling, but they are adamant about keeping levels restrictive for some time until their goal is reached.

Gold looks good after these jobs data that have already come out this week. ADP came in lower and unemployment claims came in hotter. Gold tends to react positively to poor economic news in the US which is what is happening now. Should NFP be lower, the metal will likely find more strength to the upside.

The 1D timeframe shows a breakout of the wedge and a few attempts to move higher. The past three days have only shown minimal gains, however. As long as price cane stay above the wedge pattern, we might be able to see the metal come up to test the $2,060s.

Oil saw a heavy change to the bullish side today as it now sits at a +7, increasing the score by 4 points. The changes occurred in seasonality and interest rates. The month of February is historically expected to gain around 2% on a 10-year average.

Interest rates have changed the score by 2 points as the US02Y (2 year bond yield) crossed below its 8-day moving average, indicating weaker interest rate sentiment. As we approach NFP tomorrow, the commodity would like to see a better jobs number than expected in order to strengthen its bullishness.

Retail Spotlight

The contrarian signal on oil right now is from retail sentiment which is majority long on this commodity, so the EdgeFinder checks this as a bearish sign. It still seems that the pound is shorted by the crowd while AUD and NZD are being bought.

Smart Money Spotlight

USOil is seeing a potential convergence between retail and smart money sentiment. Ideally, the EdgeFinder would like to see an increase in shorts on the oil market from retail while COT net positioning increases to the long side to be bullish.

Fundamental Spotlight

US jobless claims data came in higher than expected at 214K more claims this week. On top of this, we saw a fall in ADP NFP on Wednesday. Worse labor numbers could be a weak signal for USD and oil, while being a bullish sign for indices and gold. But we still have to wait for NFP tomorrow.

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