Markets May Extends Higher on Strong NFP

DOW JONES, NIKKEI 225, WEEKLY OUTLOOK:

Dow Jones, S&P 500 and Nasdaq 100 closed +0.52%, +1.18%, and +1.82% respectively last week
US nonfarm payrolls hit 916k in March, blowing past expectations as the service sector rebounded
The Nikkei 225 index may trade higher. Australian, HK and Chinese markets are closed for a holiday

of clients are net long.

of clients are net short.

Change in	Longs	Shorts	OI
Daily	2%	1%	1%
Weekly	3%	15%	11%

Nonfarm Payrolls, FOMC Minutes, RBA Interest Rate, Asia-Pacific Week-Ahead:

Wall Street equities may extend higher after a long weekend as nonfarm payrolls data released on Friday smashed market expectations. The S&P 500 index closed at an all-time high on Thursday as reflation hopes boosted risk appetite and the tech sector continued to regain lost ground. The Nasdaq 100 index surged 1.82% and arrived at a six-week high. A much stronger-than-expected jobs report may further boost risk sentiment and support a rally across Asia-Pacific equities this week.

The March nonfarm payrolls data came in at 916k, compared to a baseline forecast of 647k. This marks the strongest gain in seven months. February’s reading was revised up to 468k from 379k, showing continuous improvement in the job market with the help of vaccine progress. A robust reading was mainly attributed to a surge in leisure and hospitality (+280k), bars and restaurants (+176k) as well as construction jobs (+110k). The rapid healing of the labor market from the second pandemic wave may reinforce reflation optimism and lead to a stronger US Dollar.

This week, FOMC meeting minutes will be closely eyed, but traders may also take the latest job data into consideration when trying to predict the Fed’s future interest rate path. A faster-than-expected economic recovery in the US may prevent the central bank from easing further, and the rollout of US$ 1.9 trillion fiscal spending may further boost growth.

US Non-farm Payrolls – March 2021

Source: Bloomberg, DailyFX

Asia-Pacific markets look set to kick off the week in an upbeat tone, with both Dow Jones and S&P 500 futures trading half a percent higher at the open. Futures across Japan, Australia, HK, South Korea, Taiwan, Singapore, Malaysia and Thailand are pointing to a higher start, although several markets will only resume trading on Tuesday (AU, CN) or Wednesday (HK).

Looking ahead, Tuesday’s RBA interest rate decision and Thursday’s FOMC minutes are among the top event risks this week. The RBA is widely expected to keep its target interest rate unchanged at 0.1% and continue to utilize its quantitative easing program. The March RBA meeting minutes suggested that the central bank is in no rush to switch gear as “inflation was expected to remain below 2 percent over both 2021 and 2022”. Find out more from theDailyFX calendar.

Looking back to Thursday’s close, 6 out of 9 Dow Jones sectors ended higher, with 63.3% of the index’s constituents closing in the green. Information technology (+1.96%), materials (+1.03%) and communication services (+1.00%) were among the best performers, while defensive-oriented healthcare (-0.71%) and consumer staples (-0.45%) lagged behind.

Dow Jones Sector Performance 01-04-2021

Source: Bloomberg, DailyFX

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Dow Jones Index Technical Analysis

The Dow Jones indexbroke above the ceiling of the “Ascending Channel”, underscoring strong upward momentum. The index is attempting to test an immediate resistance level at 33,325 (the upper Bollinger Band). A successful attempt would probably intensify near-term buying pressure and bring the 127.2% Fibonacci extension level (33,954) into focus. The overall trend remains bullish-biased as suggested by the upward-sloped moving averages. The RSI indicator is oscillating towards the overbought threshold of 70.0, suggesting that the index may be temporarily overstretched and further advancement may lead to a minor pullback.

Dow Jones Index – Daily Chart

Nikkei 225 Index Technical Analysis:

The Nikkei 225 index reattempt to stand above the 30,000 psychological resistance level. A daily close above this level may pave the way for further upside potential with an eye on 30,214 – the 127.2% Fibonacci extension. An immediate support level can be found at around 29,420 – the 20-day SMA line. A bearish MACD divergence suggests that near-term buying power is fading.

Nikkei 225 Index – Daily Chart