Many Markets In Motion As Central Banks Talk

US stocks shrugged off dismal manufacturing reports to rally to multi-week highs Tuesday. The S&P 500 topped 2100 again and currencies and commodities were in flux amid a flurry of reports and anticipation.

Ahead of this month’s possible Fed rate increase, investors are watching for signs that unemployment will meet the Fed’s metrics for “full” employment. Official government numbers come out tomorrow and Friday, but meanwhile the private ADP Research Institute said today that November’s 217,000 increase in employment was the biggest in five months and exceeded the highest projection of economists in a Bloomberg survey.

The dollar rose on the good employment news. With weak inflation in Europe, the euro approached its weakest level since April as the price data boosted the argument for extra stimulus from the European Central Bank.

The euro has weakened more than 12 percent against the dollar this year as the ECB’s quantitative easing and the Fed’s likely rate increase are bringing new volume to the EUR/USD divergence trade. The euro reached $1.0558 on Nov. 30, the weakest since April 14.

How long that divergence will continue is anybody’s guess, but funds and banks are making large guesses. A Reuters article points out that in the last couple of decades, the dollar index has fallen every time the Fed has begun a cycle of interest rate hikes. However, those rate hikes did not usually occur amid a global slowdown such as we have in Europe and China.

The combination of the strong dollar and continued high production levels from North America as well as OPEC caused crude oil prices to drop before the Organization of Petroleum Exporting Countries sets output targets on Friday. Saudi Arabia, the dominant country in OPEC, shows no sign of curtailing its output, making it all but impossible for other member countries to do so.

Trading Ideas

All in all, it’s a week in which there are trading opportunities for bulls and bears in forex, commodities, and US and global stock indices, including those like the China A50 which most US investors don’t have access to.

One US exchange, Nadex, allows members to trade all of the above asset classes from one account and one platform, using limited risk binary options and spreads. And if you want to trade the weekly jobless claims number itself, Nadex offers a binary option on that too.

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