NFP is the last resort

All eyes are headed towards the US Jobs Report today, which is likely to have another major impact on the markets after the recent rally following the Federal Reserve’s decision.

Estimates point to 193K new jobs in January compared to 223K jobs in December, while some indicators are pointing to much lower numbers. At the same time, the Unemployment Rate is expected to rise to 3.6% up from 3.5%. Finally, Average Hourly Earnings are expected to rise by 0.3% in January, matching December’s outcome.

Today’s data would be very crucial, especially if it surprises with negative outcomes. Bear in mind that the recent weather developments, especially on the west coast might have a notable impact on the data.

SPX short squeeze continues

SPX continued to rise further during yesterday’s session reaching as high as 4195 before retreating and closing the day around 4179. Posting the highest level since August of last year with a possible confirmation that the bear market is probably over.

We will keep an eye on today’s close very carefully, as a weekly close above the 4030 resistance would confirm that the bear market is over. Yet, another downside retracement is to be expected next week before the upside trend resumes.

DXY recovered most of the FOMC declines

The US Dollar recovered most of the declines that happened right after the Federal Reserve’s decision, closing yesterday’s trading near 101.90, which confirms our outlook that a short-term retracement to the upside is due. In the meantime, as we wait for the NFP data today, a weekly close over 102.0 is needed to confirm the upside retracement which may target 102.50s followed by 103.0 which could be seen next week.

Dovish ECB & BOE

The Bank of England decided to raise the official bank rate by 50bps as widely expected, while seven members voted in favor of the decision and two members voted to keep the rates unchanged. The statement of the BOE is still hawkish, but at the same time, the bank was trying to hint that the tightening cycle is close to an end after 10 straight rate hikes.

The ECB also raised the interest rate by 50bps as widely expected, and already prepared the markets for another 50bps in the next meeting. Yet, the bank also tried to send a clear message that the tightening cycle could soon come to an end. This is not surprising for both banks given the fact that disinflation is underway.

GBPUSD breaks lower finally

The British Pound declined sharply right after the decision, reaching as low as 1.22 However, since we closed our position before the Federal Reserve’s decision, we will rejoin the trade once again at the current level of 1.2210. But this is a starter position, as we will add to this position if GBPUSD retraced higher, while our stop loss stands at 1.24. On the downside view, we are looking for a deeper decline towards 1.20 and possibly 1.19 in the coming weeks.

EURUSD on watch

EURUSD failed to reach our entry-level mentioned in our previous report at 1.1050 and declined back from 1.1030 all the way to 1.0890’s during the Asian session today, showing a possible reversal. However, we will have to wait until the end of the week to confirm that reversal and would initiate a new short position later next week.

Gold eyeing $1900 and $1880

Gold declined quickly yesterday from $1960 all the way to $1912, confirming a reversal on the daily chart, while it would be wise to wait for the weekly close. Yet, the downside retracement is likely to continue for the next few weeks. Therefore, we are looking to re-initiate our short position around $1920 in the coming hours, with a stop slightly over $1960, while the next leg lower is likely to target $1900 and $1880 over the next few days and could be a deeper retracement well below $1850.

 

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