In January, nonfarm payrolls increased by 353K, exceeding the 185K increase anticipated by the consensus. Furthermore, revisions suggest that a strong employment trend persisted into the prior year's final quarter. The average growth for payrolls during the fourth quarter of 2023 has increased from the previously reported 165K to 203K.
It appears that the labor market is more stable than was previously predicted. Moreover, the average hourly wage growth in January was 0.6%, twice the anticipated increase. This further reinforces the robustness of the labor market.
Chair Powell clarified that a rate cut in March was not the Committee's most likely outcome. However, he maintained the option, in case economic data revealed an unforeseen softening.
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Forex Technical Outlook for 05 February 2024 to 09 February 2024
Let’s see the list of events to look at this week:
- Fed Chair Powell Speaks on Monday
- ISM Services PMI on Monday
- RBA Cash Rate and Rate Statement on Tuesday
- NZD Unemployment Rate on Tuesday
- RBA Gov Bullock Speaks on Friday
- CAD Unemployment Rate on Friday
Let’s see the market outlook from the weekly forecast:
The week began positively for investors, as strong earnings statements from prominent American companies demonstrated the country's resilient economy. However, the US Dollar gained momentum after the Q4 gross domestic product release before the Non-farm payroll day.
The year's final quarter witnessed a substantial annualized growth rate of 3.3% for the economy, exceeding the initial projection of 2%. Concurrently, the ECB left the rate unchanged, as anticipated. Main refinancing operations, marginal lending facility, and deposit facility interest rates remained unchanged.
After the upbeat US employment data, the fundamental health of the US economy signals a stronger position than Europe. Although financial markets are influenced by sentiment, the persistent strength of the US Dollar is expected to become more prominent in the coming days.
The selling pressure from the upbeat NFP data pushed the price to the 50% Fibonacci Retracement level from the October low to the January high. Moreover, the selling pressure is supported by the 20 DMA, which is at the immediate resistance. The 14-day RSI remained steady below the 50.00 line, while the MACD Histogram maintained the selling pressure.
Based on the weekly outlook, a downside continuation is possible, which may lower the price towards the 1.0600 area. On the bullish side, a bullish rebound is possible from the 1.0723 support level but a stable market above the 20 DMA is needed before anticipating a stable trend.
Amid persistent volatility, the GBP/USD pair maintained a range-bound trading pattern as measured by the USD Index (DXY).
Positive surprises emanated from the Public Sector finances and Consumer Confidence. Nevertheless, these advancements were partially nuanced by deteriorating data from the CBI Distributive Trades Survey and Industrial Trends Orders.
Ahead of the central bank meetings, the BoE is anticipated to maintain its bank rate of 5.25%, with a unanimous vote being more probable than the customary 6-3 pattern. Despite this, a dovish message from the institution is less likely to occur in light of its cautious approach during the December rebound in UK inflation.
The 14-day RSI moved below the 50.00 line in the GBP/USD daily chart, while the recent price consolidated at the 20 DMA support. Moreover, the ongoing order-building within the triangle formation suggests a corrective price action, which needs a valid breakout before anticipating an impulsive trend.
Based on the weekly forecast of GBP/USD, a corrective price action could lower the price towards the 1.2595 level. A bullish rebound from the 1.2600 to 1.2499 area could be a valid long opportunity, targeting the 1.2996 level.
However, a valid downside pressure with consolidation below the 1.2500 level could extend the loss in the coming days.
The Reserve Bank of Australia is expected to hold its monthly meeting on Tuesday. As per analysts' projections, interest rates will remain unchanged, with the primary focus now being whether the central bank will maintain the option to raise rates in the future.
The December meeting minutes unveiled deliberations among policymakers concerning a prospective escalation in interest rates. The subsequent data include a significant deceleration in inflation during the fourth quarter, and lower employment figures could signal a recession.
Although policymakers can still increase interest rates, signs indicate that such an action is becoming progressively less probable. Domestic economic momentum is waning, exacerbated by Australia’s largest trading partner, China, whose economic woes originate from the turmoil in its real estate market.
Therefore, to stage a significant bullish recovery in the AUD/USD price, a substantial recovery in China and commodity prices will likely be inevitable.
Regarding China, Thursday marks the release of the most recent inflation figures. Predictions suggest that deflationary pressures may intensify in January.
AUD/USD formed a valid drop-base-drop formation, which could work as a valid downside continuation in the coming days. Moreover, the oversold RSI and red MACD Histogram could work as a confluence factor for this pair.
As per the current price outlook, bears might struggle to overcome the 0.6453 support, which could be a barrier to reaching the 0.6337 support. On the bullish side, a stable rebound from the recent consolidation could indicate a valid upside pressure.
On Friday, the Japanese Yen (JPY) encountered a significant loss against its American counterpart. The decline in the JPY's attractiveness as a safe haven currency can be ascribed to positive sentiments concerning Chinese stimulus measures.
At present, investor sentiment suggests that the Bank of Japan (BoJ) might move to ultra-dovish monetary policies for the current year. On the contrary, market anticipations persist in anticipating significant interest rate cuts from the Federal Reserve (Fed) in 2024.
According to the Ichimoku Cloud formation, the current USD/JPY price trades stable above the cloud support, suggesting an ongoing bullish trend.
A rebound from the 50.00 RSI line, with a positive Signal line in the MACD Indicator suggests a confluence bullish factor.
Based on the weekly USD/JPY forecast, investors might expect strong upward pressure where the primary resistance would be at the 151.92 level. However, a bearish recovery with a stable market below the cloud low could limit the buying pressure for the coming days.
After the US Bureau of Labour Statistics (BLS) publication of robust Nonfarm Payrolls (NFP) data for January, XAU/USD plummeted significantly. Employers in the US added 353,000 new employees, exceeding the consensus estimate of 180,000 and the previous month's 216,000. In contrast to initial projections of a marginal rise to 3.8%, the Unemployment Rate has remained stagnant at 3.7%. Moreover, the growth rate of Average Hourly Earnings surpassed the expectations of market participants, suggesting the continuation of an inflationary trend.
In contrast to the 0.4% increase observed in December, monthly average hourly wages increased by 0.6%. The annual wage increase surged to 4.5%, surpassing the previous estimate of 4.4% and expectations of 4.1%.
It is expected that favorable labor market data will influence Fed policymakers to sustain elevated interest rates for a prolonged duration. Jerome Powell, chairman of the Federal Reserve, emphasized in the monetary policy statement the importance of policymakers having greater confidence in the sustainable return of inflation to the 2% target.
Despite the selling pressure last Friday from the upbeat US employment data, the XAU/USD price failed to form a significant bearish signal. The recent price trades within the ascending channel and dynamic 20-day EMA.
The RSI shows a neutral pressure at the 50.00 line in the indicator window, while the MACD Histogram turned bullish. In that case, an upward pressure is possible as long as the 2002.78 support level is protected. Below this line, the next support is at 1972.80, before reaching the 1900.00 level.
As per the recent observation from GeeksLive, Bitcoin's volatility has reached its lowest level in a month. Moreover, short-term implied volatility (IV) and realized volatility (RZ) declined substantially, falling below -45%.
The 180-day and 365-day MVRV ratio provides insight into the sentiments of market participants. These metrics monitor the mean gain or loss incurred by investors who purchased Bitcoin during designated periods. The 365-day MVRV is at 22.60%, while the 180-day MVRV is at 10.30%. According to these numbers, investors who acquired Bitcoin 365 days ago are up an average of 22.60%, whereas those who acquired Bitcoin 180 days ago are up 10.30%.
The recent Bitcoin transfers to the Coinbase exchange suggest a downward trend, an 18% reduction since the start of 2023. As evidenced by the declining supply of Bitcoin on exchanges, investor confidence in the cryptocurrency's performance suggests that they do not intend to divest their holdings anytime soon.
A strong upward pressure is visible in the daily chart of BTC/USD as the recent sell-side liquidity sweep with a stable market above the 20 DMA indicates a trend continuation opportunity.
On the other hand, the MACD Histogram remained steady above the neutral line, while the RSI is yet to reach the 70.00 level.
In this context, BTC/USD is more likely to extend the buying pressure, where the main aim is to test the 48000.00 level.
However, a deeper correction is possible towards the 41827.26 level but below this level, the selling pressure may extend towards the 38536.66 level.