NFP Below Forecasts, Fed Bets Repriced - CPT Markets

Market Wrap-up: Fed Rate Hike Odds Fall After Weak PayrollsThe week's most anticipated event, the US Nonfarm Payrolls report, was released yesterday. While the headline figure came in well below market expectations, the report eased concerns over additional Fed rate hikes and triggered a broad repricing across global markets.

According to the US Bureau of Labor Statistics (BLS) report released on July 2, the US economy added 57,000 jobs in June, down from the revised 129,000 in May and well below the market consensus of 115,000.

Meanwhile, the unemployment rate edged down to 4.2%, slightly above 4.1% recorded a year earlier. Average hourly earnings rose 0.3% month-on-month and 3.5% year-on-year, matching market expectations.

Following the report, markets now price only a 51% probability of a Fed rate hike in September, down from 66% before the payroll data, according to the CME FedWatch Tool.

The US Dollar Index (DXY), which tracks the greenback against a basket of major currencies, fell nearly 1%, retreating from 101.57 to around 100.60. The weaker dollar lifted major currencies, including the euro, British pound, and especially the Japanese yen. USD/JPY declined roughly 1.2%, falling from 162.60, a level widely associated with potential Japanese intervention, to 160.80.

As Fed tightening expectations eased, gold surged 2.2% to $4,180, with bullish momentum remaining intact.

Risk sentiment also improved across US equities, with all three major indices closing higher. The Dow Jones advanced more than 600 points, reaching the 53,000 level.

Despite the shortened trading week due to today's US Independence Day holiday, major US indices still posted solid weekly gains. The S&P 500 rose 1.8%, while the Dow Jones and Nasdaq gained nearly 2.0% and 2.1%, respectively.

Looking ahead for today, US markets will remain closed for the bank holiday, which could lead to lower liquidity and irregular price swings across global markets. Traders will instead focus on European manufacturing data, along with speeches from ECB President Lagarde and BOE Governor Bailey.

XAU/USD: Gold Extends Rally on Softer Fed Outlook 

Key takeaway:

Gold rallied sharply on July 2 after weaker-than-expected US payroll data reduced expectations that the Federal Reserve will continue raising interest rates this year.

Markets now price only a 51% probability of a September Fed rate hike, down from 66% before the employment report, according to the CME FedWatch Tool.

The World Gold Council (WGC) also reported that central banks returned to net gold purchases in May, with official global gold reserves increasing by a net 41 tonnes during the month. This continued official-sector demand provided an additional supportive backdrop for bullion.

Technical Outlook:

Daily Bias: Bullish with Correction Risk

Support: 4,100

Resistance: 4,221

WTI: Oil Slips on Lower Geopolitical Risk Premium 

Key takeaway:

WTI crude declined as diplomatic progress between the US and Iran eased supply concerns and supported the restoration of commercial shipping through the strategically important Strait of Hormuz.

The Doha negotiations significantly reduced the geopolitical risk premium that had previously supported energy prices.

Saudi Arabia's crude oil exports have recovered to around 90% of pre-war levels as more oil tankers successfully resumed transit through the Strait of Hormuz.

Technical Outlook:

Daily Bias: Cautiously Bearish

Support: 67.00

Resistance: 68.91

DXY: USD Falls as Markets Reprice Fed Outlook 

Key takeaway:

The US Dollar Index remained under pressure as investors reassessed expectations for the Federal Reserve's hawkish policy outlook.

Traders scaled back expectations for further Fed tightening after US Nonfarm Payrolls missed market forecasts.

Speaking on July 1, Fed Chair Kevin Warsh stated that inflation expectations and inflation risks have eased in recent weeks, while reiterating that the Fed remains committed to bringing inflation back to its 2% target.

Technical Outlook:

Daily Bias: Bearish

Support: 100.54

Resistance: 100.99

EUR/USD: Euro Gains Despite Cooling Eurozone Inflation 

Key takeaway:

The euro strengthened as the weaker US dollar outweighed softer Eurozone inflation data, although cooling inflation has reduced expectations for further ECB policy tightening.

Eurozone headline CPI slowed more than expected to 2.8% year-on-year in June from 3.2% in May.

Core inflation also eased to 2.4% year-on-year, down from 2.6% previously.

The softer inflation report reduced pressure on the ECB to maintain an aggressive policy stance, which could continue to limit upside potential for the single currency despite the current USD weakness.

Technical Outlook:

Daily Bias: Bullish

Support: 1.14177

Resistance: 1.14879

USD/JPY: Yen Rallies as Weak US Payrolls Hit Dollar 

Key takeaway:

USD/JPY is on track to end its eight-week winning streak as weaker US employment data triggered broad US dollar selling, allowing the Japanese yen to recover from levels near its weakest point in four decades.

The yen may receive additional support from a notable shift in Japan's intervention strategy.

According to two sources familiar with the matter, Japanese officials are moving away from their previous practice of openly signalling intervention risks, increasing the possibility of unexpected currency intervention should excessive yen weakness re-emerge.

Technical Outlook:

Daily Bias: Cautiously Bearish

Support: 160.79

Resistance: 161.53

Weaker-than-expected US payrolls became the dominant macro driver, prompting markets to dial back expectations for further Fed tightening and triggering a broad repricing across asset classes.

The softer dollar supported gold, major currencies, and US equities, while USD/JPY reversed sharply as the yen benefited from both declining US yields expectations and renewed intervention risks.

Meanwhile, oil remained under pressure as easing geopolitical tensions reduced supply concerns and stripped out part of the geopolitical risk premium.

With US markets closed today, trading conditions may become thinner and more volatile, leaving investors focused on European economic releases and speeches from ECB President Lagarde and BOE Governor Bailey for fresh policy signals.

If you are looking for a platform to take advantage of market volatility, CPT Markets is a compelling choice. Trade global markets on advanced trading platforms with competitive spreads, fast execution, and a seamless experience across all devices.

Whether you are a beginner or an experienced trader, trading short-term or long-term, the right platform can make the difference - Trade smarter with CPT Markets!

This content is for informational purposes only and should not be considered investment advice. Trading financial products such as Forex and CFDs involves a high level of risk and may not be suitable for all investors. You may lose all of your invested capital. Please ensure that you fully understand the risks involved and carefully consider your financial situation before trading.