A cold
shower caused by the January labour market data in the United States seems to
be very sobering. The yields for U.S. 10-year Treasuries jumped to 3.56% from
3.39%, while the U.S. Dollar jumped by 1.0%, and the S&P 500 broad market
index edged lower by 0.5%.
This data
came as an unexpected surprise as unemployment in the U.S. fell to 3.4%, a
record low for the past 53 years. Non-Farm Payrolls data jumped to 517,000 vs
185,000 expected. This is an enormous gap between expectation and fact, which raises
doubts about the real victory of the Federal Reserve (Fed) over inflation,
claimed by Jerome Powell, Chair of the U.S. monetary watchdog. Wall Street is now
expecting inflation aftershocks that would ruin hopes for any interest rate
decreases this year. Investors are betting that Mr Powell will make it clear
during his interview on Tuesday.
U.S.-China
relations suddenly worsened after the U.S. shut down an alleged Chinese spy
balloon. U.S. secretary of State, Antony Blinken, has postponed his visit to
Beijing, while China accused the U.S. of violating “the spirit of international
law and international conventions” by shooting down a civilian airship. It
seems as if investors are looking for any minor negative reason for a sharp
decline.
U.S. President
Joe Biden will address the nation on Tuesday. So, we could expect the story
with the Chinese balloon to have another surrealistic spin off.
Another
strange story of stock manipulation brought down the Indian Adani Group. Hindenburg
Research accused the enterprise of manipulating stocks, having unsustainable
debt and taxation issues. The evolving crisis has had serious effects on the
Indian stock market as Adani Group’s market cap dropped by $110 billion.
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 to the support level of 4080-4100
points. The index is expected to bounce towards the nearest resistance at 4180-4200
points, or continue to drop to 4000 points.
Brent crude
prices have failed to get over $87-89 per barrel. The Organisation of Petroleum
Exporting Countries and its allies (OPEC+) failed to support prices during its
meeting on February 1. Rising crude inventories in the U.S. 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 have falen below $1880-1900 per ounce,
increasing chances of a further downfall to the support at $1790-1810 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. After the
release of the Non-Farm Payrolls data, the Dollar has been seen to gain
momentum and may continue to strengthen further. 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.