January 8, 2021

The Big Day Is Here And Markets Can’t Afford To Ignore It

The Big Day Is Here And Markets Can’t Afford To Ignore It

Today is the most important day for the financial markets, and traders are highly unlikely to be distracted by anything else. The mother of all economic data, the US NFP, will be released today, and investors will be dissecting every part of this number. In nearly eight months, today is the first time that we are expecting the non-farm employment number to be below the 100K mark. This is clearly a reflection of the deteriorating coronavirus situation in the US, which have made the many US States reverse the restrictive coronavirus measures. 

Could There Be An Upside Surprise?

There are plenty of signs that today’s number is going to be underwhelming, and one of the most significant clues for this came on Wednesday when the ADP number failed to impress the Street by any measure. In addition to this, we also have the consumer confidence number that failed to impress investors. The Challenger Job cut also jumped higher, and the four-week average for jobless claims also soared from 778K to 836K.

Expect the Unexpected 

However, traders should never underestimate the volatility of the US NFP number, especially the fact that these numbers are going to be under the influence of the holiday period. There is always a possibility of an upside surprise as there could be an abnormality in the final reading. The ISM Manufacturing Employment and the continuing claims do support a better than expected reading. This could catch traders off guard.

The Big Question

Overall, the dollar index is off its lows and it is showing some strength ahead of the official release of the US NFP. The question, which deserves the most attention among investors and traders, is whether the market is going to ignore a weak US NFP reading? If so, could it focus on more positive things, like the uncertainty of the US elections being over, the expectation of more stimulus in the near future, and more people having the coronavirus vaccine in the coming weeks/month, which should start to control the coronavirus situation?

Market Reaction 

Suppose the narrative takes this shape after the economic data release, then there is no doubt that the massive bull run we have seen for the Dow Jones will extend its rally even further. On the other hand, if the market displays its concern about feeble economic recovery, surely the Dow Jones is going to see some healthy correction.

Bitcoin 

In the crypto space, yesterday was a big day for Bitcoin. The cryptocurrency achieved a major milestone and crossed the $40K level, which has made the $50K price as real as it can be. After recording another all-time high, we see profit-taking among many investors as they know that Bitcoin is a kind of beast that can easily move 10% in a day in any direction.

Yesterday, Bitcoin was up over 10% at one time, before giving up some of those extravagant gains. There is no doubt that the price has gone too far and too fast, and we are due for a healthy correction. But for now, it seems like traders do not want to see any correction, as we only see the Bitcoin price consolidating for a short period, and the rally takes over once again.

It is likely that we may see this trend once again as the Bitcoin price is consolidating today, and it is trading within the highs and lows of yesterday. The big question is how the Bitcoin price will perform over the weekend, as the weekend’s price action has become more critical.