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Markets Revive But Can They Survive Nonfarm Payrolls And U.S. CPI?

By NAGA (Michalis Efthymiou)Market OverviewOct 05, 2022 04:22AM ET
www.investing.com/analysis/markets-revive-but-can-they-survive-nonfarm-payrolls-and-us-cpi-200630674
Markets Revive But Can They Survive Nonfarm Payrolls And U.S. CPI?
By NAGA (Michalis Efthymiou)   |  Oct 05, 2022 04:22AM ET
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The week has illustrated a strong “risk on” market so far with most assets in the medium and high risk category seeing an increase. This includes stocks, oil, and cryptocurrencies. However, most economists are voicing concerns about false hopes. According to economists, for the “risk on” sentiment to continue it would require inflation to show a strong decline next week.

Crude oil saw the strongest spike, increasing by over 3.60% throughout Tuesday. This is mainly in response to OPEC’s meeting taking place today and the predicted cut in oil productions. Some analysts expect an output cut of 1 million barrels per day, whereas others have indicated up to 2 million. The weakening of the US dollar has also created support for crude oil prices.

The US Dollar Index has slightly risen during this morning’s Asian session but remains relatively low compared to last week’s price range. The price of the dollar has almost formed a full price correction, however, this will largely depend on the Nonfarm Payroll figure and even more so, the CPI.

Gold Spot

The price of XAU/USD is forming a clear upward trend on the smaller timeframes such as the 1-hour and 5-minute charts. The price has managed to breakout of the previous resistance level at $1,687 and is now looking to form a bullish breakout at $1,735. When looking at technical analysis, we can see that the price is trading above Moving Averages and the Volume-Weighted Average Price, both indicate upward price movement.


Rising gold prices are mainly influenced by the declining US Dollar, but may also find support from the recent reduction in price and the deteriorating global economy. Even with the decline of the US Dollar, traders should be careful that the currency does not find support from economic releases over the next week. The US is expecting the release of September employment and inflation figures, both of which have the ability to create volatility and drive trends.

Yesterday evening, the President of the Federal Reserve Bank of New York, Mr Williams, made known the readiness of the financial authorities to further hike interest rates - even in the face of inflation slowdown signs. In terms of fundamentals, this is positive for the US Dollar, but Mr Williams did admit that low economic growth and higher unemployment would be a side effect of these actions.

The head of the Federal Reserve Bank of Richmond, Mr Barkin, also spoke to journalists yesterday evening. He advised that recent changes in global supply chains and trade relations could make inflation more volatile in the future. The FOMC member may have potentially also been referring to the recent sharp rise in the cost of crude oil. This could pressure the Central Bank to not only raise interest rates but also keep them high for longer.

DAX

The price of the DAX has increased by 6.40% over the past 48 hours, and has now reached the previous breakout level which was broken on the 23rd September. The price is showing very little volatility this morning and has formed a slight retracement. The large increase in price and the resistance level likely have traders looking for further clarity and price drivers.

The price of the DAX was not only supported by the “risk on” sentiment which can be seen across the globe, but also from Germany’s latest fiscal policy support. The €200 billion package which has recently been announced is aimed at supporting businesses and consumers with energy costs.

However, the European Central Bank (ECB) is predicted to increase interest rates again as the Eurozone sees inflation increase above 10%. Another hike is likely to pressure the stock market.

Markets Revive But Can They Survive Nonfarm Payrolls And U.S. CPI?
 

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Markets Revive But Can They Survive Nonfarm Payrolls And U.S. CPI?

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