ZFX: Negative interest rates by Fed? Another shock for the markets

Thursday (May 7) Review

• Oil prices retreated all the gain in earlier session after the announcement of the poor US employment figures. The June contract of WTI crude futures edged lower finally, dropping from $26 level. Saudi Arabia has raised the crude oil price of its export to Asia for June, which was just bullish in a very short term.

• The initial jobless claims fell to 3.169 million last week, a drop of five consecutive weeks, which was still more than the expectations, around 3 million. The continuous claims rose to 22.647 million, far more than 20 million which was expected. The numbers indicate that the current situation of the US labor market was worrying and forecast a very gloomy result of the NFP on Friday, especially after the ADP employment report. It is now expected 21.5 million job cuts in April NFP and the unemployment rate will jump to 16%.

• During the US session, the market started to examine the possibility of the negative rate policy by Fed.  The pricing of the Fed funds futures contracts showed that traders are now expecting the Fed may cut the rate below zero, at the end of the year. The dollar plunged as the negative rate policy would be very likely to make a massive sell-off pressure.

• The global pandemic is still severe, with nearly 4 million confirmed cases worldwide and more than 270000 deaths. The outbreak in Russia is not under control so far. Once again the new cases jumped over 10000 in a single day. The experts there believed that the cases will still increase sharply in the coming days.

ZFX analyst Jacob Leung said that if investors begin to expect negative rate policy of Fed due to the poor economic data, it would be very bearish to the greenback, at least in the short term. The drop of the dollar will inevitably have a big impact on global asset prices. It is very important for investors to pay attention to whether Chairman Powell will clarify such possibility, which may cause another big move.

AUD / USD

Support: 0.6500; 0.6450 Resistance: 0.6550; 0.6570

Recommendation: go long 0.6490, target 0.6520, stop loss 0.6475. (Recommendation does not take into account the bid-ask spread factor)

Position follow-up and profit and loss: 0.6410 has been short, with a target of 0.6390. (Take profit) (recommended on May 6) (Recommendation does not take into account the bid-ask spread factor)

Cumulative profit and loss: 535 pips

EUR / USD

Support: 1.0820; 1.0780 resistance: 1.0860; 1.0890

Recommendation: Go long 1.0820, target 1.0840, stop loss 1.0800. (Recommendation does not take into account the bid-ask spread factor)

Position follow-up and profit and loss: — (Recommendation does not take into account the bid-ask spread factor)

Cumulative profit and loss: 405 pips

GBP / USD

Support: 1.2350; 1.2300 Resistance: 1.2440; 1.2480

Recommendation: wait and see. (Recommendation does not take into account the bid-ask spread factor)

Position follow-up and profit and loss: 1.2460 long, target 1.2490, stop loss 1.2430. (Cancelled) (Recommended on May 6) (Recommendation does not take into account the bid-ask spread factor)

Cumulative profit and loss: 305 pips

GOLD

Support: 1707; 1695 resistance: 1720; 1730

Recommendation: Long 1705, target 1715, stop 1700. Long 1724, target 1730, stop 1717. (Recommendation does not take into account the bid-ask spread factor)

Position follow-up and profit and loss: 1714 has been long, with a target of 1720. (Take profit) (recommended on May 6) (Recommendation does not take into account the bid-ask spread factor)

Cumulative profit and loss: -3 USD

USOIL (WTI)

Support: 24.00; 22.50 Resistance: 25.50; 26.70

Recommendation: short 23.8, target 23, stop loss 24.4. (Pay attention to the OTC quotations may have differences) (Recommendation does not take into account the bid-ask spread factor)

Position follow-up and profit and loss: —

Cumulative profit and loss: $ 9.8

US30 (Dow)

Support: 23900; 23750 Resistance: 24350; 24600

Recommendation: Go long with 24000, target 24250 and stop loss 23800. (Pay attention to the OTC quotations may have differences) (Recommendation does not take into account the bid-ask spread factor)

Position follow-up and profit and loss: 24050 has been short, hit the target 23850. (Take profit) (Recommended on May 6) (Pay attention to the OTC quotations may have differences) (Recommendation does not take into account the bid-ask spread factor)

Cumulative profit and loss: -300 points

Risk Warning: The above content is for reference only and does not represent ZFX’s position. ZFX does not assume any form of loss caused by any trading operations conducted in accordance with this article. Please be firm in your thinking and do the corresponding risk control.