The Labor Department reported a net gain of over 940,000 jobs for the month of July, which dropped the unemployment rate to 5.4%. Economists expected a gain of 850,000 and a rate of 5.7%.
As a result, there were some significant moves in the futures markets in the Treasuries, currencies and precious metals.
Treasury prices declined along the entire yield curve, but most notably at the long end, as the market may now anticipate a Fed that takes its foot off the monetary stimulus pedal.
The Dollar strengthened against all major currencies in anticipation of these higher yields down the road.
Previous metals such as Gold and Silver fell sharply as those markets also anticipate a tightening Fed sooner rather than later.
The interesting thing about this reaction is that Congress is about to pass a significant infrastructure bill, and then the Biden administration still wants to spend another $3.5 trillion on top of that.
While it is likely that particular spending is scaled back quite a bit, it will still dwarf the Obama spending package in 2009.
Another issue is that, while prices in a number of commodities have pulled back, a number of these markets are still trading at high levels.
The grain markets come to mind, along with sugar, coffee, unleaded gas, natural gas, heating oil and live cattle.
Given the continued ongoing issues with some supply chains, it is hard to imagine that inflation declines substantially from current levels.
With all that said, when markets break down similarly to silver and gold yesterday, lower prices should be expected in the foreseeable future in those markets.
In any event, below are a few charts I found interesting.
This is a chart of the October 2021 gold futures contract. The market traded lower by $45 and is now testing the June lows. Given the overall chart structure, I don’t expect a massive move lower from here.
The Australian Dollar is appears to be set to make new lows if it follows through on Friday’s price action. This is a bear flag pattern formed within a current downtrend, as the market is trading below its 200 day, 50 day and 20 day EMAs.
This is the chart of the September Coffee futures contract. I should note that the December contract will take over as the lead contract over the next few days.
After a big spike due to some adverse weather in Brazil, the market sold off sharply. Over the last few days, it has consolidated a bit.
This is a classic Spike and Ledge pattern. A break of the low of August 2nd would suggest another move down. This is a nice pattern for shorter term traders to trade.
This is Natural Gas going back to earlier this winter. Natural Gas has been the star performer so far this summer as demand for gas as a cleaner alternative to coal is driving prices.
Combine that with the current administration’s focus on even clearner energy sources, and there is limited investment in generating new supply.
If you have an interest in trading futures, have a look at this discussion on how to diversify your portfolio with these markets.
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