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  • Weekly Summary: Non-Farm Payrolls May Add Some Positive Notes to Rallying Stocks

Weekly Summary: Non-Farm Payrolls May Add Some Positive Notes to Rallying Stocks

This super trading week is gaining momentum. High volatility is seen to be reigning over the markets after verbal interventions were made by the heads of the Federal Reserve (Fed) and the European Central Bank (ECB). The January Non-Farm Payrolls report, which will be published today, may add some positive flavour to the market.

The S&P 500 broad market index has made it to the resistance level at 4180-4200 points after the strange behaviour of the Fed’s Chair Jerome Powell. It seems like Mr. Powell has accidentally entrapped himself and confused markets by  awkwardly trying to claim victory over inflation while justifying all the actions taken by the Fed in 2021 and 2022 while he still can. However, there is a clammy feeling in the air that a downturn in the stock market is just around the corner.

Big Tech sector has primarily pushed the market up this week while presenting  mixed reports. Apple (AAPL) has failed to meet analyst’ estimates for revenues, earnings and sales. Amazon.com (AMZN), Alphabet (GOOG) and Meta Platforms (META) have reported better while also generating some negative signals. It seems that the market needed to absorb  another shock to get investors into a bullish trap.

The controversial position of the ECB’s President, Christine Lagarde, had a minor effect on this chaos. Investors read everything between the lines of Lagarde’s testimony and sold the Euro against the Dollar despite her formal hawkish words.

For January 2023, the U.S. labour market is set to generate more volatility on Friday despite the very conservative expectations of Wall Street. Unemployment is expected to rise to 3.6% from 3.5% during the previous month, while the Non-Farm Payrolls report is estimated to go down to 185,000 from 223,000 in December 2022. Our statistical modeling suggests that Non-Farm Payrolls will exceed 185,000 and be close to 220,000. Considering contraction of the initial jobless claims by 50,000 in January, unemployment could be at 3.5% or 3.6%.

There are very few positive expectations for the U.S. Dollar in the market. So, any positive surprises may push the Dollar considerably up.

Technically, the S&P 500 index continues within the upside formation with the primary target at 4100-4200 points. The index reached the resistance at 4180-4200 points and went into the downside correction. The nearest support level is seen at 4080-4100 points. Any spike above 4180-4200 points could be a false start and is likely to be very short.

Brent crude prices have failed to get over $87-89 per barrel. The Organisation of Petroleum Exporting Countries and its allies (OPEC+) has failed to support prices during its meeting on February 1. Rising crude inventories in the United States are pushing prices down towards the support level of $77-79 per barrel.

Gold prices are moving inside the mid-term, upside formation with targets at $2000-2100 per troy ounce by the middle of 2023. Prices are now returning to $1880-1900 per ounce. Odd price growth over the last weeks may point to a possible swift change of a trend to the downside during elevated volatility to rewrite last year’s lows.

The money market is still ignoring any upside signals for the American currency. So, any positive news for the Dollar may strengthen the Greenback rapidly. Considering the high volatility in the market, it is better to place orders that are attached to longer perspectives. Short trades for EURUSD opened at 1.06700-1.07200 with a downside target at 5000 points below the opening level and the same 5000 points for a stop-loss order should be considered very attractive.