Towards the end of the week, many data releases will have an impact on the market. On Wednesday, we have GDP data out of the US and a speech from the Fed chair Powell.
The GDP is quarterly so this may not have a massive impact due to the fact it does not reflect the current state of inflation as accurately as Monthly data. The speech from Powell will also be less weighted as the market is anticipating PCE and Jobs Data later in the week.
On Thursday, we will have the PCE data and Jobless Claims which showed a substantial impact on markets in recent months. If PCE data comes out higher than expected, it can be bullish for the Dollar and vice versa. Jobless Claims are a better market mover as this indicates the number of individuals that filed for unemployment.
If the forecasted reading for Jobless Claims comes out at 225k up 2k from the last month’s 223k reading, we can conclude that monetary tightening is working, otherwise, this can be bearish for the Dollar as it implies that the Fed can slow down on hawkish policies faster which can be followed by lower rate hike increments and possibly fewer rate hikes in 2023.
The most eventful trading day will come on Friday with Jobs Data being released in the form of nonfarm payrolls and unemployment rate.
The unemployment rate is forecasted at 3.6%, up from 3.5% last month, as it should be increasing due to the Fed delivering high-interest rate hikes in their mission to combat inflation and slow down growth. A lower-than-expected reading in the unemployment rate will mean there has been positivity out of the jobs sector and will be taken as bullish for the Dollar.
The main event will be Nonfarm payrolls as it is the foremost indicator of consumer spending and indicates the number of people employed in the past month excluding the farming industry. It is a clear signal of inflation or in this case, whether aggressive rate hikes have managed to tighten cash flow in the US.
If nonfarm payrolls (NFPs) come out higher than the forecast, which is 200k, then investors would conclude that inflation is not slowing down as recent CPI data indicated. The market will respond with bullish moves in the Dollar and a reversal of the current trend.
If NFP data comes out lower than the forecast, we may expect the Dollar to continue falling on the downtrend and break below to a new range under $105.5.
In today’s DIFX Analytics, we’re going to look into the following assets:
Bitcoin Breaks Above the 100-EMA and hits $17,000
Bitcoin has broken the 50-day and 100-day Exponential Moving Averages on the 4-hourly chart to the upside signaling some bullish momentum. RSI is reading at 68 at the time of writing and is indicating a reversal in the trend.
We have not seen the asset break these indicators since the fall a couple of weeks ago. This could be the first sign that bulls have regained control in the near term. If jobs data is bearish for the Dollar, we should see upward gains in digital assets across the crypto market.
The dollar is waiting for the Fed’s Powell
Traders should keep an eye out for these levels during this week as we can expect choppy markets if data is against the forecasts. The trendline on RSI will be a good signal.
Traders which are long on the dollar can look for opportunities at this trend line on the hourly chart. Traders which are short on the dollar can take action if this trend line is broken on RSI.
Gold is hovering at $1755 in an Asymmetric Triangle
Gold is in the middle of its current range trading at $1753. We see a slightly asymmetric triangle forming in price action and the break to either side will result in moves to the first key levels.
The data releases may see these levels hit by the end of the week. If jobs data is low and supportive of a tightening being effective, the dollar short trade will be an inverse for Gold and we should see bulls toward $1782. The opposite may happen if the Jobs Data comes out higher than the forecast.
EUR/USD long signal when RSI hits 40 on the 4-hour chart
EUR/USD has been trending up recently as the Dollar short trade has been on the move since inflation data has been supportive of monetary tightening.
If traders want to follow the uptrend, they will be looking for opportunities to go long.
The RSI on the 4-hour chart has been hitting this support line marked in yellow during this bull run. Traders can keep an eye on the next time this level is hit to take action, especially if price action is at one of the support lines indicated in green.
Traders can utilize the resistance levels marked at $1.049 and $1.060 to manage their trades.
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DIFX shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee, or implication by DIFX that the forecast information will eventuate, that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades by the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses in particular if the conditions or assumptions used for the forecast or mentioned in the analysis do not eventuate as anticipated and the forecast is not realized.