Wall Street Faces Losses Amid Labor Market Strength and Rate-Hike Concerns.

Introduction

In a recent turn of events, Wall Street has witnessed a significant decline as concerns about a potential interest rate hike intensified. The strong performance of the labor market has led to an increase in bond yields, fueling these apprehensions. This article delves into the details of the market downturn and sheds light on the implications of the robust labor market for the economy.

Wall Street’s Sharp Decline

Labor Market Strength Amplifies Worries

The major indexes of Wall Street experienced a widespread sell-off on Thursday. This decline can be attributed to data that unveiled a robust labor market, surpassing expectations. The surge in private payrolls during June indicated a stable job market amid looming recession concerns. However, this positive report also amplified fears of an imminent interest rate hike by the Federal Reserve.

Historical Declines in the S&P 500 and Dow

The repercussions of this data were evident as the S&P 500 registered its largest daily percentage decline since May 23. Similarly, the Dow faced its most substantial daily decline since May 2. These downward trends indicate the market’s response to the anticipation of monetary policy adjustments by the Federal Reserve.

Implications of Labor Market Strength

Stability Amid Recession Threats

Despite concerns about a potential recession, the labor market has remained remarkably stable. The unexpectedly high growth in private payrolls during June has provided reassurance. It is worth noting that while there were fewer job postings in May, they were still at a relatively high level. These observations suggest that the job market continues to hold its ground amidst the prevailing economic uncertainties.

The Federal Reserve’s Dilemma

At its June policy meeting, the Federal Reserve opted not to raise interest rates. However, there is an expectation that the interest rates will be revised during their July meeting. The case for a rate hike was presented by Dallas Fed President Lorie Logan, signaling a potential shift in monetary policy. The market’s reaction to this prospect was reflected in the increased bond yields and the subsequent sell-off.

Treasury Yields Surge

Following the release of the employment report, Treasury yields experienced a notable surge. The two-year Treasury yield, which is closely tied to interest rate expectations, reached a 16-year high. Furthermore, the benchmark 10-year yield surpassed the 4% mark. These developments underscore the market’s response to the possibility of an accelerated rate-hike timeline.

Future Rate Hike Speculation

Based on CME’s Fed Watch, the likelihood of a rate hike by the Federal Reserve in November has increased for U.S. interest rate futures. These speculations are driven by the recent data highlighting labor market strength. The market will closely monitor upcoming meetings and announcements by the Federal Reserve to gauge the potential impact on investment strategies and overall market sentiment.

What Happened in the US Session?

Strong Job Growth and Market Response

The most recent ADP report indicated strong job growth, with non-farm payrolls (NFPs) adding 497k jobs in June, surpassing the estimated 228k. This significantly exceeded expectations, overshadowing slightly higher jobless claims and a small decline in JOLTS Jobs Openings. Consequently, the dollar index (DXY) reached around 103.60.

What Can We Expect in the Asia Session?

Caution Ahead of NFP Report

As the final trading day of the week commences, market participants are likely to exercise caution due to the highly anticipated release of the Bureau of Labor Statistics NFP report. The robust NFP data from ADP may influence the market sentiment during the Asia session. The dollar index (DXY) is currently trading at approximately 103.10, reflecting the dynamics of the overnight trading period.

The Euro (EUR)

Key News Events Today

• ECB President Lagarde Speaks

Expectations for EUR Today

While Christine Lagarde, the president of the European Central Bank, is scheduled to appear at the Economic Meetings in Aix-en-Provence, France, it is anticipated that the BLS employment report from the U.S. will overshadow all other economic events. The Euro experienced a brief dip below 1.0850 but demonstrated resilience overnight. As the Asia session unfolds, cautious optimism prevails.

Central Bank Notes

• The ECB raised the three key interest rates by 25 basis points.
• Economic growth projections have been slightly lowered.
• The Governing Council emphasizes the necessity of sufficiently restrictive interest rates to achieve the inflation target.
• Rate decisions will be data-dependent, considering various economic factors.
• The next ECB meeting is scheduled for July 27, 2023.

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key News Events Today

• Unemployment Rate
• Foreign Currency Reserves

Expectations for CHF Today

The Swiss franc, known for its safe-haven status, may benefit from the increased volatility in equity markets and the rise in risk aversion. As the USDCHF pair declines towards 0.8950, further downward pressure is expected. Market participants will closely observe the BLS NFP statistics for any additional impact on this currency pair.

Central Bank Notes

• SNB has tightened its monetary policy, raising the SNB policy rate by 0.25 percentage points to 1.75%.
• The new inflation forecast predicts moderate growth for the rest of the year.
• The GDP is projected to grow around 1% this year.
• The next SNB meeting is scheduled for September 21, 2023.

Next 24 Hours Bias

Weak Bearish

Gold (XAU)

Key News Events Today

• BLS Non-farm Employment Report
• Unemployment Rate

Expectations for Gold Today

Gold experienced a decline as a result of the strong NFP data from ADP, falling to $1,904/oz. Currently, spot prices remain above $1,900/oz. However, the highly anticipated NFP data will play a crucial role in determining the future trajectory of gold prices. Should job growth in the U.S. gain momentum, gold prices may experience further declines.

Next 24 Hours Bias

Weak Bullish

Global Market Overview

Asian Stock Markets

• Nikkei is down 0.56%
• Shanghai Composite up 0.01%
• Hang Seng down 0.33%
• ASX down 1.51%

European Equities

• DAX futures are down 2.57%
• CAC 40 is down 3.13%
• FTSE down 2.17%

U.S. Stock Market

• Dow Jones down 1.07%
• S&P 500 down 0.79%
• Nasdaq 100 is down 0.82%

Commodities

• Gold at $1,913.90 (+0.15%)
• Silver at $22.69 (-0.15%)
• Brent Oil at $76.89 (+0.48%)
• WTI Oil at $72.16 (+0.47%)

News & Data

• (GBP) BoE Gov Bailey Speaks at 13:00
• (USD) Nonfarm Payrolls (Jun) Forecast 225K, Previous 339K at 18:00
• (USD) Unemployment Rate (Jun) Forecast 3.6%, Previous 3.7% at 18:00
• (USD) Average Hourly Earnings (MoM) (Jun) Forecast 0.3%, Previous 0.3% at 18:00
• (CAD) Employment Change (Jun) Forecast 20.0K, Previous –17.3K at 18:00
• (EUR) ECB President Lagarde Speaks at 22:15

GBPUSD: Bullish Momentum Remains Strong

Introduction

In the current market scenario, the GBP/USD chart demonstrates a bullish momentum, with the price positioned above a significant ascending trend line. Additionally, the ascending trend line acts as a strong support level, further confirming the positive outlook.

Ascending Trend Line Provides Support

Support Level 1: 1.2682

The first support level at 1.2682 serves as pullback support, indicating a potential recovery in the near term. Traders and investors should closely monitor this level as it may offer a favorable buying opportunity.

Support Level 2: 1.2605

Located at 1.2605, the second support level coincides with a 61.80% Fibonacci Retracement. This convergence of support levels enhances its significance and reinforces its role as a strong support zone.

Resistance Levels Indicate Potential Barriers

Resistance Level 1: 1.2750

The first resistance level at 1.2750 is challenged by a 78.60% Fibonacci retracement on the upside. This level presents a hurdle for the price to overcome and may slow down the bullish momentum temporarily.

Resistance Level 2: 1.2847

Positioned at 1.2847, the second resistance level is characterized by high resistance with multiple swings. It represents a formidable barrier to the price and should be closely monitored by market participants.

Trade Suggestion

For traders considering potential trades in the GBP/USD market, a compelling suggestion is to initiate a buy position at 1.2745, with a take profit (TP) level set at 1.2819. To manage risk, a stop loss (SL) order can be placed at 1.2690.

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EURUSD: Market Direction Remains Uncertain

Introduction

The EUR/USD chart currently exhibits neutral momentum, indicating a lack of clear market direction. Traders and investors should exercise caution and closely monitor key support and resistance levels.

Neutral Momentum and Price Range

Support Level 1: 1.0879

The first support level at 1.0879 acts as a crucial level for the price. It represents overlap support, suggesting potential buying interest. Conversely, if breached, it may lead to a bearish breakdown.

Resistance Level 1: 1.0900

Positioned at 1.0900, the first resistance level presents a significant barrier to the price. It is characterized by a high resistance with multiple swings. A bullish breakout above this level could signal a positive shift in market sentiment.

Symmetrical Triangle Pattern

The presence of a symmetrical triangle chart pattern indicates a period of consolidation. This pattern often precedes a breakout or breakdown in the market. Traders should closely monitor the upper and lower trendlines for potential trading opportunities.

Trade Suggestion

To capitalize on potential market movements, a trade suggestion is to consider a sell position at 1.0879, with a take profit (TP) level set at 1.0861. To manage risk, a stop loss (SL) order can be placed at 1.0895.

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AUDUSD: Modest Positive Momentum Persists

Introduction

The AUD/USD chart currently reflects modest positive momentum, suggesting a cautiously optimistic market sentiment. Traders and investors should carefully assess key support and resistance levels to identify potential trading opportunities.

Modest Positive Momentum

Resistance Level 1: 0.6639

The first resistance level at 0.6639 acts as an overlapping barrier and aligns with a 38.20% Fibonacci Retracement level. This convergence of resistance makes it a potential target for bullish continuation, signaling further upside potential.

Support Levels Provide Stability

Support Level 1: 0.6597

Support Level 2: 0.6580

Both the first and second support levels, situated at 0.6597 and 0.6580 respectively, serve as overlap supports. Notably, the second support level coincides with a 127.20% Fibonacci Extension level, further reinforcing its significance as a support zone.

Resistance Level 2: 0.6717

Located at 0.6717, the second resistance level acts as an overlapping barrier and a 38.20% Fibonacci Retracement level on the upward movement. Traders should monitor this level as it poses a potential challenge for the price.

Trade Suggestion

To take advantage of the modest positive momentum in the AUD/USD market, a suggested trade is to initiate a buy position at 0.6623, with a take profit (TP) level set at 0.6654. To manage risk, a stop loss (SL) order can be placed at 0.6600.

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USDJPY: Positive Momentum Supported by Ascending Trend Line

Introduction

The USD/JPY chart currently exhibits positive momentum, with the price positioned above a significant ascending trend line. This trend line acts as support and reinforces the bullish bias in the market.

Ascending Trend Line Offers Support

Support Level 1: 143.48

The first support level at 143.48 is overlap support and demonstrates Fibonacci confluence with 23.60% and 38.20% Fibonacci Retracement. This level presents a potential target for a bearish continuation, and traders should monitor it closely.

Support Level 2: 142.93

Situated at 142.93, the second support level overlaps with the first level, further strengthening its significance as a support zone. Traders should pay attention to this level as it could influence the price action.

Resistance Levels Pose Challenges

Resistance Level 1: 144.07

Representing a pullback barrier, the first resistance level at 144.07 challenges the positive momentum. Additionally, an intermediate support level at 143.20 acts as an overlap support, providing further significance.

Resistance Level 2: 144.71

Located at 144.71, the second resistance level coincides with a 78.60% Fibonacci retracement. This level presents a formidable challenge for the price and should be monitored closely by traders.

Trade Suggestion

To capitalize on the positive momentum in the USD/JPY market, a trade suggestion is to consider a buy position at 143.55, with a take profit (TP) level set at 143.92. To manage risk, a stop loss (SL) order can be placed at 143.27.

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DAX 40: Strong Bearish Momentum Prevails

Introduction

The DAX 40 chart currently exhibits strong bearish momentum, signaling a negative market sentiment and a potential downward movement in the near future.

Strong Bearish Momentum

Support Level 1: 15664.3

From the first support level at 15664.3, which represents a major multi-swing low support, there is a possibility of a bullish rebound. This level’s significance is further enhanced by its alignment with a Fibonacci expansion of -27%.

Resistance Level 1: 15873.6

It is important to note the first resistance level is located at 15873.6, as it signifies a significant overlap resistance. This level denotes a potential area of price congestion and should be closely monitored by market participants.

Resistance Level 2: 16121.3

The second resistance level at 16121.3 serves as an additional overlap resistance and coincides with a 61.80% Fibonacci projection. The convergence of these factors further strengthens the level’s significance as a potential barrier for the price.

Trade Suggestion

To take advantage of the prevailing bearish momentum in the DAX 40 market, a suggested trade is to initiate a sell position at 15513.81, with a take profit (TP) level set at 15426.05. To manage risk, a stop loss (SL) order can be placed at 15596.70.

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Crude Oil: Bullish Momentum Suggests Upside Potential

Introduction

The WTI/USD (Crude Oil) chart currently exhibits a bullish momentum, indicating a potential upward movement in the market. Traders and investors should carefully analyze key levels to identify favorable trading opportunities.

Bullish Momentum

Resistance Level 1: 72.05

A bullish extension towards the first resistance level at 72.05 is possible, as it represents an overlap resistance and aligns with a 61.80% Fibonacci projection. This level serves as a potential target for further price appreciation.

Support Levels Offer Stability

Support Level 1: 69.93

Support Level 2: 67.03

The first support level at 69.93 is overlap support and falls within a 38.20% Fibonacci Retracement, making it particularly strong. Additionally, the second support level at 67.03 provides extra support as an overlap support level.

Resistance Level 2: 75.34

Positioned at 75.34, the second resistance level coincides with a 100% Fibonacci projection and acts as an overlap barrier. Traders should closely monitor this level as it poses a potential challenge for the price.

Trade Suggestion

To capitalize on the bullish momentum in the Crude Oil market, a trade suggestion is to consider a buy position at 72.26, with a take profit (TP) level set at 72.66. To manage risk, a stop loss (SL) order can be placed at 71.95.

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Gold: Bearish Momentum Persists

Introduction

The XAU/USD (Gold) chart currently trades below a significant falling trend line, indicating a bearish momentum. Traders and investors should carefully assess key support and resistance levels to gauge potential market movements.

Bearish Momentum

Resistance Level 1: 1940.80

The first resistance level at 1940.80 is regarded as an overlap resistance. If the price reacts bearishly at this level, it could trigger a decline toward the first support level.

Support Levels Provide Retreat Zones

Support Level 1: 1904.72

Support Level 2: 1862.84

The first support level at 1904.72 represents overlap support with a 100% Fibonacci projection. Additionally, the second support level at 1862.84 serves as retreat support for the price.

Intermediate Support Level: 1902.38

An intermediate support level at 1902.38 exists as a multi-swing low support with a 78.60% Fibonacci Retracement. Traders should take note of this level as it adds to the overall significance of the support zone.

Resistance Level 2: 1975.48

The second resistance level at 1975.48 overlaps the first level and coincides with a 78.60% Fibonacci Retracement. This level poses a significant challenge for the price and should be closely monitored.

Trade Suggestion

To take advantage of the prevailing bearish momentum in the Gold market, a suggested trade is to initiate a buy position at 1914.31, with a take profit (TP) level set at 1908.78. To manage risk, a stop loss (SL) order can be placed at 1918.59.

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Bitcoin: Bullish Momentum Indicates Potential Upside

Introduction

The BTC/USD (Bitcoin) chart currently exhibits bullish momentum, suggesting a potential upward movement in the market. Traders and investors should carefully assess key support and resistance levels to identify favorable trading opportunities.

Bullish Momentum

Support Level 1: 30314

A bullish bounce off the first support level at 30314 is possible, as it represents overlap support and aligns with a 23.60% Fibonacci Retracement. This level serves as a potential buying zone for traders.

Support Level 2: 29755

The second support level at 29755 also acts as an overlap support and lines up with a 50% Fibonacci Retracement. Traders should monitor this level as it adds further significance to the support zone.

Resistance Level 1: 31151

A multi-swing high resistance with a 61.80% Fibonacci projection is observed at the first resistance level of 31151. This level presents a potential barrier to the price and should be closely watched.

Resistance Level 2: 31877

Positioned at 31877, the second resistance level represents a swing high resistance. Traders should carefully assess this level, as it could potentially limit the upside movement of Bitcoin.

Trade Suggestion

To capitalize on the bullish momentum in the Bitcoin market, a trade suggestion is to consider a buy position at 29990, with a take profit (TP) level set at 30358. To manage risk, a stop loss (SL) order can be placed at 29682.

Conclusion

In conclusion, Wall Street faced substantial losses driven by concerns over an impending interest rate hike. The strength of the labor market, while promising, has fueled these fears and led to a sell-off across major indexes. The Federal Reserve’s upcoming decisions and announcements will be crucial in shaping market sentiment. Additionally, global markets, including Asian and European equities, have displayed mixed performance. As investors await the Bureau of Labor Statistics NFP report, market participants exercise caution and closely monitor the potential impact on various currencies and commodities, such as the Euro, Swiss Franc, and Gold.

Frequently Asked Questions (FAQ)

1. What led to the sharp losses in Wall Street?

The widespread sell-off in Wall Street was primarily triggered by concerns over a potential interest rate hike fueled by the strength of the labor market and increased bond yields.

2. Why did the labor market’s performance cause rate-hike fears?

The robust performance of the labor market, particularly the significant growth in private payrolls during June, raised concerns that the Federal Reserve might raise interest rates sooner than anticipated.

3. Did the Federal Reserve raise rates in June?

No, the Federal Reserve did not raise rates in June. However, there is an expectation that rates might be revised during their upcoming meeting in July.

4. How did the Treasury yields respond to the employment report?

Following the release of the employment report, Treasury yields experienced a notable increase. The two-year Treasury yield reached a 16-year high, while the benchmark 10-year yield exceeded 4%.

5. What were the implications of the strong job growth reported in the ADP report?

The strong job growth reported in the ADP report overshadowed other factors and led to a surge in the dollar index (DXY) but caused some decline in the USDCHF pair.

6. How did gold prices react to the strong NFP data?

Gold prices initially fell in response to the strong NFP data from ADP, but managed to hover above $1,900/oz. The highly anticipated NFP report will play a significant role in determining the future direction of gold prices.

7. What are the expectations for the Euro (EUR) in the Asia session?

While the Euro experienced a brief dip below 1.0850, it showed resilience overnight. However, market participants exercise caution as the BLS employment report from the U.S. takes center stage during the Asia session.