A weak US employment Cost Index (0.2% versus 0.6% expected) was the main reason for the heavy fall of the USD on Friday, especially against the EUR where the majority of long USD traders were positioned.
The news came as a shock to those expecting Fed to increase rates in September. Since costs are still low, wages are likely not to increase, which will not lead to increase spending from the workers, nor for the prices of goods and services to be increased which would lead to higher inflation, and ultimately another reason to increase Rates. So in summary, this reading does not call for a rate hike increase, however the FED will closely watch the news ahead of its meeting to decide the policy.
This week, we have a string of too many important data starting with core PCE, personal spending and ISM manufacturing today, as well as non-farm payrolls on Friday. Weaker data would likely lead to further depreciation of the USD.
Trading quote of the day: The basic concept that applies to both poker and trading is that the primary objective s not winning the most hands, but rather maximizing your gains” Jeff Yass
OIL
Pivot: 48.65
Likely scenario: Short positions below 48.65 with targets @ 45.95 & 45.35 in extension.
Alternative scenario: Above 48.65 look for further upside with 49.5 & 50.5 as targets.
Comment: As long as 48.65 is resistance, likely decline to 45.95.
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