Friday, October 7, 2016

Post-Employment Report; Treasuries Stretched and Uncertain

Ten Year Treasury yield has touched the 200 day moving average (1.75%) for the first time since January.  Some would look to this yield mark as a resistance level.  I would note also that TYZ6, the active Ten year future made a 7th new session low today, signaling that the current bearish trend is somewhat stretched.  On my candlestick chart, TYZ6 is also forming a bullish engulfing if settles between 129-31 to 130-07. 

Many would look to the employment report today and say that ‘clearly the November FOMC meeting is now off the table (as far as the prospect for a rate hike at that date).  Some would argue further that in order for the Fed to move in December, the data moving forward will need to be all the stronger.  However, the work week expanded by 0.1 hrs to 34.4 and the average hourly earnings increased 0.2% higher to $25.79.  Economist will spin this many ways.  The bottom line is that there continues to be labor market slack and that slack continues to be removed.

The dollar gave ground on the employment report and gold is higher.  These are further signs that the market participants have reduced their expectations for Fed policy rate hikes.  

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