Today is the most crucial day for market players, as we will 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 influences it for the rest of the month. As always, the Fed will watch this data very closely, which is highly likely to affect their monetary policy, which they will be announcing next week.
US and European stock futures are trading mildly lower as traders will take a cautious approach ahead of this data. There is 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 will likely produce another set of solid readings. But at the same time, investors will also look closely at the impact of the data on the US economy.
The US NFP data will be released at 13:30 BST, and the forecast for the number is 197K, while the last number came in at 263K. The US unemployment rate is also expected to increase to 5.3%. The previous reading was at 5.2%, and the Average Hourly Earnings m/m is expected to remain at 0.3%, the same as the prior reading of 0.3%.
The Market Playbook
Now the critical part becomes how this will impact markets. The range of US NFP estimates for today’s number is broad, and it is expected to be anywhere between the 150K to 250 mark. But we think the most important number is 150K, with anything lower than 150K able to throw the Fed out of balance. We mean that if the number comes below the 150K reading, we can imagine a scenario under which we may see aggressive rate hikes under a significant threat.
Such a scenario could be optimistic for the stock market as the stock market is addicted to monetary policy support. But simultaneously, we could see the dollar index falling sharply. However, suppose the actual number comes above the 250K mark, 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. Market players believe 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 1,600 as an essential level of support, and if the price drops beyond this point, we may see an intense sell-off in the coming days. As for the resistance, the number which could be tested today is 16650. Overall, the chances are that we may see the gold price dropping today.
In the crypto space, we 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. The price may test the 1,700 price level, which may open the door to retesting the next resistance of 2K, which matters the most. As for Bitcoin, the price level which matters the most is 25K. BTC has tested the 21K price level a few times, and if the positive momentum continues to support the price action, we could be looking at a healthy weekend for cryptos.