Today is the most important day for market players as today when 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 not only sets the trading tone for today but it 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, which they will be announcing next week.
US and European stock futures are trading mildly lower as traders are going to take a very cautious approach ahead of this data. There is a minimal volume in the markets ahead of this data as the action tends to happen only after the economic reading. Although it is generally expected that the upcoming US NFP number is likely to produce another set of strong readings. But at the same time, investors are also going to look closely at the impact of the higher inflation data t on the US economy.
The US NFP data will be released at 13:30 BST, and the forecast for the number is 250K while the previous number came in at 372K. The US unemployment rate is also expected to increase to 5.0%. The previous reading was at 4.9%%, and the Average Hourly Earnings m/m is expected to remain at 0.3% which is the same as the previous reading of 0.3%.
The Market Playbook
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 200K to 250 mark. But we think the most important number is 200K, with anything lower than 150K able to throw the Fed out of balance. What we mean by that is if the number comes below the 150K reading, we can imagine a scenario under which we may possibly see the aggressive rate hikes under a major threat.
Such a scenario could 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 above the 250K mark, and especially above the 300K. In that case, we could imagine the Fed taking an even more aggressive stance towards their monetary policy, which means that we could see the Fed increasing the interest rate in their meeting by more than 50-basis points. Currently, the market players believe that the Fed will only increase the interest rate by 50-basis points.
In terms of the market’s price action, there is a possibility that the stock market could 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 weak number could push the gold price higher. In terms of important price levels, investors and traders will be looking at the 1,718 as an important level of support, and if the price drops 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 do think that Bitcoin prices could 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 possible that the price may test the 2K price level, and that may open the door for the price to retest the next resistance of 2.5K, which matters the most. As for Bitcoin, the price level which matters the most is 30K. BTC has tested the 23K 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.