This week, investors mainly concentrated on the price of US Stocks which saw a massive spike, Crude Oil which attempts a rebound and the US Dollar which struggles to find support. Investors today will be focused on the latest Non-Farm Payroll (NFP) and the US Unemployment Rate.
Throughout yesterday’s market analysis, we evaluated the price movement of the Dow Jones. The Dow Jones (US30) had increased by more than 3% and saw its strongest increase since the 10th of November. However, we stressed the fact that the price was receiving indications of being overbought and that markets seemed to have ignored certain comments from the Fed.
Indeed, during yesterday’s US Session the price declined up to 1.56% and is now forming a symmetrical triangle. It is for this reason that it is important to monitor the trend but also the price condition. Currently, the price has moved from an overbought signal to neutral on most oscillators. Investors are now eager to see how the market reacts to the new US employment figure.
Furthermore, the price of Crude Oil again increased to a new price high and continues to form higher price waves. In general, the price was supported by the weakening of quarantine restrictions in China and the OPEC meeting on Sunday. In order for the price to continue finding support, restrictions in China will need to continue being reduced.
In addition to this, investors are hoping OPEC will not signal a reduced level of demand for the first quarter of 2023. Lastly, the price has also been supported by the decline in the US Dollar. Currently, economists predict no change in production targets this year by OPEC. OPEC believes a reduction may not be required due to the G7’s price cap on Russian Crude Oil.
EUR/USD
The EUR/USD continues to increase for a third consecutive day mainly being fueled by a higher market risk appetite and signals of a lower rate hike in December. The price has currently increased to almost a 6 month high (June 2022). However, the price movement has mainly been triggered by the US Dollar rather than the Euro strengthening. The Euro has declined against both the Pound and the Japanese Yen throughout the week.
The price of the exchange has formed a 2.20% impulse wave meaning that the price may be approaching a retracement soon. However, an overbought has only been indicated in the short to medium-term timeframes. On the 15-minute timeframe, the price continues to receive bullish trend signals, but traders should be cautious if the price declines below support levels. Support levels can be seen at 1.0503 and 1.0468.
Yesterday the price of the US Dollar was further pressured by the latest PCE Price Index which declined from 0.5% to 0.2% and also the Manufacturing PMI which declined from 50.2 to 49.0. The decline below 50.0 was specifically important as below 50.0 indicates a higher possibility of economic decline.
At the same time, the Eurozone is also not receiving specifically positive data. For this reason, price action and today’s Non-Farm Payroll may play a more enhanced role. The Average Hourly Earnings are not likely to play a significant role now that inflation has slowed, however, the NFP and Unemployment Rate can create serious volatility.
The unemployment rate is expected to remain at 3.7%, which is healthy and still remains within the Fed’s target. The Federal Reserve has previously signaled its willingness for the Unemployment Rate to rise to 4-4.5%. The NFP figure is expected to decline from 261,000 to 200,000. Volatility is mainly expected if the figures are significantly different. For example, an NFP figure of 100,000 or 300,000.
Summary:
- The Dow Jones declined after Wednesday's large increase in price. Traders continue to consider whether the price is overbought.
- The EUR/USD continues to see a bullish trend while the Euro declines against other competitors. EUR/USD mainly being influenced by the decline in the US Dollar.
- The US Dollar comes under pressure from further economic data such as the latest PCE Price Index and Manufacturing PMI.
- Investors turn their attention to today’s employment figures which are expected to show a slight slowdown.