Upbeat U.S. Job Market Fuels Treasury Yield

The U.S. job market exceeded expectations, leaving the financial market perplexed about the strength of the economy despite the prevailing high-interest rate environment.

Last week, the U.S. job market exceeded expectations, leaving the financial market perplexed about the strength of the economy despite the prevailing high-interest rate environment. The diminished belief in a Fed rate cut this year has heightened anticipation for the upcoming U.S. Consumer Price Index (CPI) reading, which is expected to provide insights into the Federal Reserve’s next moves. The U.S. long-term treasury yield has surged above 4%, impacting gold prices, which remain subdued below the $2050 level. Additionally, the market is eagerly awaiting Tokyo Core CPI data for cues on potential monetary policy shifts by the Bank of Japan. In the oil market, prices have stabilised around $73, balancing concerns over Red Sea tensions with increased oil supply from OPEC.

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Current rate hike bets on 31 January Fed interest rate decision: 

Source: CME Fedwatch Tool

0 bps (95%) VS -25 bps (5%)  

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Market Overview

Economic Calendar

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Market Movements

DOLLAR_INDX, H4

The Dollar Index, tracking the USD against major currencies, is poised for a bullish week following robust US Nonfarm Payrolls data. With job additions surpassing expectations at 216K and an unemployment rate of 3.70%, exceeding forecasts, investors scale back rate cut expectations. However, downbeat non-manufacturing data and anticipation of multiple 25 basis point rate cuts in 2024 keep the dollar’s gains in check, leaving the long-term trend uncertain. Market watchers advise continued monitoring of US economic updates.

The Dollar Index is trading higher while currently testing the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 57, suggesting the commodity might extend its gains after successfully breakout above the resistance level since the RSI stays above the midline. 

Resistance level: 102.60, 103.45

Support level: 101.75, 101.30

XAU/USD, H4

Gold prices experience volatility following upbeat US economic data and rate cut expectations from the Federal Reserve. Initially tumbling after strong Nonfarm Payrolls and Unemployment rate releases, gold rebounds as speculators anticipate increased demand due to potential rate cuts in 2024.

Gold prices are trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, whale RSI is at 5 0, suggesting the commodity might extend its losses since the RSI retreated sharply from overbought territory.

Resistance level: 2050.00, 2055.00

Support level: 2035.00,  2030.00

GBP/USD，H4

The GBP/USD pair demonstrated strength, advancing despite the release of upbeat U.S. job data last Friday. The better-than-expected employment figures have introduced uncertainty into the market regarding the Federal Reserve’s next moves. Initially anticipating a rate cut from the U.S. central bank this year, traders are now reassessing their expectations. The U.S. long-term treasury yield rebounded, surpassing the 4% threshold, potentially bolstering the dollar’s strength.

The GBP/USD pair gained last Friday but was suppressed by the strong resistance level at 1.2730 level. The RSI has been gaining to near the 50-level while the MACD is on the brink of breaking above the zero line, suggesting the bullish momentum is forming. 

Resistance level: 1.2730, 1.2815

 Support level: 1.2528, 1.2437

EUR/USD，H4

The EUR/USD pair remained steady, showing little change despite the Euro’s CPI figures falling below expectations. Simultaneously, the U.S. job data surpassed market expectations. The positive employment figures in the U.S. spurred a recovery in the U.S. long-term treasury yield, pushing it back above the 4% level. This development may exert upward pressure on the dollar’s strength, potentially negatively influencing the EUR/USD pair.

The EUR/USD has been suppressed by the strong resistance level at 1.0955. The RSI has been hovering at below 50 level while the MACD is flowing at below zero, giving the pair a neutral signal. 

Resistance level: 1.0955, 1.1041

Support level: 1.0866, 1.0775

USD/JPY，H4

The Japanese Yen exhibited some strength, with the USD/JPY pair showing a downward trend. This movement comes ahead of the eagerly awaited Tokyo Core CPI reading scheduled for Tuesday. The pair had been moving upward, driven by robust economic data in the U.S. that strengthened the dollar. In addition, recent market sentiment suggests speculation that the Bank of Japan (BoJ) might postpone its planned monetary policy shift, hindering the Yen’s strength.

USD/JPY broken above its long-term downtrend resistance level suggests a bullish bias for the pair. The RSI has broken into the overbought zone while the MACD has crossed on the above, suggesting the bullish momentum is temporarily eased. 

Resistance level: 145.35, 146.88

 Support level: 143.82, 141.64

Dow Jones, H4

The US equity market maintains a flat to bearish trajectory as investors exercise caution in the face of uncertainty surrounding potential rate cuts in 2024. Eyes turn to upcoming consumer price index figures for insights into interest rate trajectories, with investors urged to stay vigilant for further trading signals.

The Dow is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 67, suggesting the index might extend its losses since the RSi retreated sharply from overbought territory. 

Resistance level: 37850.00, 39275.00

Support level: 36735.00, 35950.00

CL OIL, H4

Oil markets experience a modest uptick as geopolitical tensions in the Middle East intensify. US Secretary of State Anthony Blinken’s diplomatic efforts to address regional conflicts, particularly the Israel-Hamas situation, contribute to the heightened uncertainty. Against this backdrop, oil prices edge higher, buoyed not only by the geopolitical developments but also by positive signals from the US economic front and shifting expectations in global central bank monetary policies, fostering a more optimistic outlook for oil in 2024.

Oil prices are trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 51, suggesting the commodity might extend its gains since the RSI stays above the midline. 

Resistance level: 78.65, 84.10

Support level: 72.70, 67.40