Today is the most important day for market players as today we will get to see the latest reading of the US NFP data. This economic reading commands the most attention among investors and traders as the economic data sets the trading tone for today and also influences it for the rest of the month. As always, the Fed will watch this data very closely, and it is highly likely to influence their monetary policy.
US and European stock futures are trading higher, although traders are going to take a very cautious approach ahead of the US NFP data. Generally speaking, there is minimal volume in the markets ahead of this data as the action tends to happen only after the economic reading. Market players are expecting the US NFP number to produce another set of strong readings. But at the same time, investors are also going to closely look at the impact of Omicron variant on the US economy.
The US NFP data will be released at 13:30 BST, and the forecast for the number is 553K, while the previous number came in at 531K. The US unemployment rate is also expected to fall further to 4.5%. The previous reading was at 4.6%, and the Average Hourly Earnings m/m is expected to drop to 0.4% from its previous reading of 0.4%
The Market Play Book
Now the important part and how this is going to impact the markets. Well, the range of US NFP estimates for today’s number is wide, and it is expected to be anywhere between the 350K to 700 marks. But we think the most important number is 600K. Meanwhile, anything lower than 300K, could throw the stock market out of balance and the Fed. That’s because if the number comes out below the 300K reading, market players will not expect a more aggressive stance from the Fed going forward. Remember, recently, the Fed has said that they may look into ending the tapering process sooner than later. A weak reading will certainly take that option off the table.
Such a scenario may be positive for the stock market as the stock market is addicted to monetary policy support. But at the same time, we could see the dollar index falling sharply. However, suppose the actual number comes out above the 500K mark, and especially above the 700K. In that case, we should imagine the upcoming meeting as a live meeting—meaning the more aggressive taper announcement could take place during that event.
In terms of the market’s price action, there is a possibility that the stock market will rally as traders may take a strong number as a good economic sign. At the same time, we could see the dollar index strengthening on the back of this data.
The precious metal’s price action is expected to be a wild one today, and this is because the US NFP number is likely to bring higher volatility for the metal. Again, a strong reading may trigger a sell-off for the gold price as the dollar index picks up strength, and a feeble number could push the gold price higher. In terms of important price levels, investors and traders will be looking at the 1,733 as an important level of support, and if the price drops below this price point, the chances are we may see intense sell-off in the coming days. As for the resistance, the number which could be tested today is 1800. Overall, the chances are that we may see the gold price dropping today.
In the crypto space, we think that Bitcoin prices are likely to move higher, and the coming weekend will be an important one once again as the price tends to move higher over the weekend. As for the second biggest coin by market cap, Ethereum. It is highly likely that the price may test the 5K price level, and that may open the door for the price to retest its all-time high, which matters the most. As for Bitcoin, the price level which matters the most is 60K. BTC has tested the 54K price level a few times now, and if the positive momentum continues to support the price action, we could be looking at a healthy weekend for cryptos.