An exceptionally strong Nonfarm Payroll report, coupled with unemployment at a 53-year low, has seen the DXY surging

What You Need To Know

U.S. Nonfarm Payrolls unexpectedly increased by 517,000 in January, well above the 185,000 estimates of economists. At the same time, the unemployment rate dropped to 3.4%, to a 53-year low and average hourly earnings grew at a steady clip as expected. Traders in Asia can expect a choppy start to the week as Friday’s sell-off on U.S. stock markets following a stunningly positive U.S. jobs report and heightened geopolitical tensions after a U.S. fighter jet shot down a suspected Chinese spy balloon on Saturday. While China says the device was a climate-research “airship” that strayed off course, Chinese stocks extended losses as the incident increased investor fears of economic retaliation. In a sign of more tension to come, both sides will likely impose more export bans on technology in different industries. In addition, China banks are offering preferential interest rates as President Xi urges consumer spending to drive growth rebound and says it’s a strategy to improve domestic consumption, it might also boost oil demand. 

Look Out For

Current rate hike bets on 22nd March Fed interest rate decision: 

25 bps (2.6%) VS 50 bps (97.4%)  

Market Overview

Economic Calendar

Market Movements

DXY

The dollar strengthened in the wake of positive economic data, spiking up to hit 103.12, its highest since Jan. 12. According to the Labour Department, nonfarm payroll unexpectedly increased by 517,000 in January, well above the 185,000 estimates of economists. At the same time, the unemployment rate dropped to 3.4%, to a 53-year low and average hourly earnings grew at a steady clip as expected. A shockingly strong jobs report raises concerns about the economy slipping into recession and the Fed’s rate hike decision. Meanwhile, a strong U.S. job report may persist U.S. inflation and bolsters the case for more rate increases from the Federal Reserve. Investors should focus on the Fed’s following announcement for further trading signals.

As we can see, the dollar spiked to $103.19 as of writing. It was triggered by the economic data released last Friday. Therefore, the RSI shows an uptrend momentum ahead of the overbought territory. At the same time, MACD has illustrated a bullish momentum ahead in the short term.  

Resistance level: 103.44, 104.32

Support level: 102.56, 101.81

XAU/USD

Gold prices fell 2.81% to $1865 against the strong U.S. dollar on Friday. The U.S. Labour Department released its job report with an unexpectedly strong figure, boosting up the U.S. dollar significantly. The readings spurred fears that the Fed has enough economic headroom to keep raising interest rates and drove a recovery rally in the dollar and Treasury Yield. Markets await more economic cues from a Tuesday discussion with Jerome Powell at the Economic Club of Washington D.C.. Investors could keep an eye on the discussion about labour data’s effect and future inflation path. 

Gold prices dropped significantly against the strengthened dollar on Friday as markets expect the Fed would continue its aggressive rate hike decision. MACD has illustrated increasing bearish momentum, while RSI drops to 28, indicating the commodity is trading in a bearish momentum ahead. 

Resistance level: 1870, 1904

Support level: 1810, 1766

EUR/USD 

The euro fell 1.04% to $1.0785 after releasing strong U.S. job data. The NFP data shows a higher-than-expected figure which drove the U.S. dollar to rally on Friday. The nonfarm payrolls might give the Fed more fuel to continue its aggressive rate hike decision for longer. Therefore, investors speculate that the euro movement might continue weakening against the dollar. We could expect the pair to enter a bearish move in the short term. Investors can keep an eye on the upcoming Christine Lagarde speech later on Monday. 

EUR/USD is dropping significantly from the resistance level. MACD has illustrated the pair are entering into bearish momentum. While RSI falls to 33, indicating the pair is extending its losses from last Thursday, we could expect the pair to drop further in the short term. 

Resistance level: 1.1031, 1.1166

Support level: 1.0770, 1.0486

BTC/USD

BTC fell by 1.77% to $22970 against the strengthened dollar as of writing. The pair was flattened on Sunday as investors awaited the next comment from Federal Reserve Chairman Jerome Powell. Along the weekend, the market is giving mixed signals as strong job numbers, whereas mediocre earnings results and traders might expect a recession this year, although a weak one. 

Despite the strong US job data hitting stock and crypto prices hard, the BTC can still hover around $23,000. From our technical perspective, bitcoin’s sentiment remains neutral-bullish, keep watching for the next breakout. Further movement for the pair might depend on the upcoming announcement from the Fed Jerome Powell, which will be scheduled on Tuesday. Meanwhile, MACD and RSI both indicate the pair has entered bearish momentum in the short term. 

Resistance level: 23317,  23984

Support level: 22502, 21433

DOW JONES

The Dow Jones index slipped 0.38% to 33,926 points on Friday amid unexpectedly strong NFP data, and investors digested a mixed bag of mega-cap company earnings reports. While NFP data hinted the Fed might continue its aggressive rate hike path, directly hitting the stock markets. At the same time, investors worry that the Federal Reserve’s monetary policy tightening may plunge the economy into a recession. Investors could keep an eye on the upcoming Jerome Powell Speech on Tuesday for further trading signals. 

In the short term, the index remains trading in a neutral movement. MACD has illustrated neutral-bearish momentum ahead. While RSI is trading at 53, it indicates a neutral-bearish momentum ahead. 

Resistance level: 34388, 35639

Support level: 32731, 30945

GBP/USD 

The pound dipped 1.46% to $1.2059 due to a much larger-than-expected jump in U.S. jobs growth lifted the dollar as it drove bets that the Federal Reserve could increase more interest rate next month. The pound extended its losses against the strengthened dollar from Thursday after the Bank of England’s policy meeting. Market participants are awaiting the Federal Reserve Jerome Powell Speech, due on Tuesday for further trading signals. 

The overall trend for the pound remains bearish in the short term, but it could have some technical rebound in these days as RSI indicating the pair has entered into an oversold zone. Meanwhile MACD also indicates the pair has entered into bearish momentum. 

Resistance level: 1.2130, 1.2426

Support level: 1.1926, 1.1743

USDJPY

The yen slumped 2.6% to 131.92 as the government approached Bank of Japan Deputy Governor Masayoshi Amamiya about succeeding Haruhiko Kuroda as head of the BOJ. Investors assume a greater likelihood that the current ultra-easy monetary policy could persist for longer. Besides, the U.S. NFP data also helped to boost the dollar, and the yen dropped further. The yen has hit above the 132-level at one time since Jan. 12, as markets see Amamiya as more dovish than some other contenders. Therefore, a dovish signal triggered the yen to drop further. 

The pair’s sentiment has entered into a bullish movement in a few days, and the rebound is quite strong. MACD has illustrated increasing bullish momentum ahead. While RSI spiked up to 69, touching the overbought zone, indicating a strong bullish momentum after the BoJ announcement. 

Resistance level: 134.46, 137.74

Support level: 130.71, 126.73

CL OIL

Oil slumped to $73.50 per barrel, a third straight monthly loss in January amid concerns about rising U.S. stockpiles and so-far softer China demand. There’s also been some caution over the pace of China’s recovery, with data showing weakness persisting among manufacturers and in sales of cars and homes. The unexpectedly strong NFP data increased almost three times above the forecast growth of 188,000 and against December’s revised number of 260,000. The outperforming figures give the Fed a new challenge in its monetary policy. Markets think the Fed might continue its aggressive rate hikes to tame inflation back to its target. Therefore, investors might speculate on the higher interest rate, a stronger dollar, and oil prices dropping. 

Oil prices are trading lower and testing the next support level of $72.35. However, MACD has illustrated bearish momentum ahead. While RSI is trading at 31, the commodity might continue to trade lower against the strong US dollar. 

Resistance level: 76.27, 81.80

Support level: 72.35, 70.29