US and European futures are trading higher as traders while traders digest the US NFP data and look ahead to this week’s most important economic reading, the US CPI number due on Friday. The poor Chinese Caixin Services PMI reading is also a matter of concern. However, traders are somewhat optimistic about economic activity in China as the country has relaxed covid rules.
There is no doubt that the US stock market has been through a major rollercoaster that pushed the S&P 500 briefly into a bear market territory as it plunged over 20% from its recent high last month. However, the index bounced back quickly from those lows, and the question for investors and traders is if the current upward momentum is in a dead cat bounce phase or if this rally will continue. The answer to this question depends on the US CPI reading, which will be released on Friday, and traders expect the US inflation to show signs that it has peaked. In reality, the devil is in detail, so we do not think that the inflation peak matters here. What smart money is more focused on is how long it will take for inflation to go back to its normal level or even close enough to the Fed’s target of 2%. Until we see a significant improvement in the US CPI number, it is tough to think bulls are out of the woods.
On Friday, we had the US NFP number, which confirmed that the US labour market is somewhat firm, or at least it is not trending downward. This particular element supported the sentiment among investors and traders. They helped the US stock indices to bounce off their lows, but the stock indices still closed in negative territory towards the end of the day. We have seen the sell-off on Wall Street. This could become the theme this week because traders believe that the Fed is increasing the interest rate in economic weakness, which could derail economic recovery and push the US towards stagflation. Remember, the US ADP number on Thursday confirmed a horrible reading, which means that the private sector is in for a rough ride. In addition to this, we have poster children like Elon Musk and Jamie Dimon talking about serious threats of a recession. It is extremely difficult for traders to hold and maintain an optimistic view in this environment.
Gold prices are trading higher after closing another week in positive territory. Looking at the price action over the last three weeks, the shining metal has been making a series of higher highs and higher lows, and this has helped the precious metal post three consecutive weeks of gain.
When it comes to the gold price, traders are focused on the strength or the weakness of the dollar index, which is very much dependent on two elements. The first is US economic numbers, and the second is the Fed’s monetary policy stance. Although Friday’s number was better than expected, it wasn’t exactly thriving. The best you can think of from Friday’s report is that the Fed can continue on its monetary policy path, but this doesn’t mean that the Fed can begin to increase the interest by more than half a point in each of the upcoming meetings. This particular fact is helping the gold price to stay above water.
The most significant price level for the gold price this week is its resistance which is at 1,900, and the most important economic reading for the shining metal is the US CPI number which is due on Friday. If the gold price begins to slide below the 1,830 price level and stays below its, we could see the gold bulls struggling for their lives.
The digital gold, Bitcoin, has had a more positive weekend, and this is pushing the BTC higher today. The important thing about Bitcoin is that it can make a new high when the price retraces more than 70% from its previous high. If one looks at the BTC price, it has gone through that cycle very recently, and still, the price is trading well below the 50% price level compared to its all-time low.
It is important to note that bitcoin is that traders and investors have started to pay more attention to its lower lows over a yearly time frame. When you look at the lows of Bitcoin formed each year over the last ten years, it becomes clear that the actual trend is skewed to the upside than to the downside. In addition to this, if you look at the number of days that Bitcoin spent trading near its lows after falling from its all-time high, that ratio tells us that a rebound could be around the corner, and traders must pay attention to these details.
In terms of this week’s price action, a new sentiment will be set if the BTC price moves above 34K or below the 27K price level.