State of the economy
The Department of Labor’s monthly jobs report has become one of the most important economic indicators to watch as the Federal Reserve assesses the health of the economy.
US employers added 263,000 jobs this September, slightly more than expected and reflecting the weakening labor market.
Bitcoin and Ethereum traded in a downtrend and ended the week lower in line with conventional risk assets, though not by the same amount.
Bitcoin (BTC) fell sharply early in the US trading day, dropping 1.9% on heavy volume following the release of the US jobs report. In the hours that followed, prices recovered slightly before dropping back to around $19,450.
Ether (Ethereum), which still maintains a close relationship with BTC traded in a similar way. The second-largest cryptocurrency by market capitalization shed 1.7% at 12:00 UTC (8:00 am ET), also on above-average volume.
Both BTC and ETH have held steady in a tight range during the recent flurry of economic releases, both good and bad. BTC’s increased correlation with gold prices further reflects its muted volatility. Gold has historically been considered a safe-haven asset for investors.
Traditional financial markets
In traditional financial markets, the Dow Jones Industrial Average (DJIA), the high-tech Nasdaq Composite and the technology-heavy S&P 500 were down 2.1%, 3.8% and 2.8%, respectively.
US job growth slowed in September, but not as much as most market observers expected. Non-farm payrolls increased by 263,000, down 17% from August but higher than the projected 250,000.
The unemployment rate eased to 3.5% from an expected 3.7% and the labor force participation rate stood at 62.3%, almost identical to the previous month’s 62.4%.
Employment data provided the latest evidence that the economy is slowing, but it is not enough for the Federal Open Market Committee (FOMC), the group of Federal Reserve officials that sets the central bank’s discount rate, to justify reversing the recent wave of hikes. .
The CME FedWatch tool now puts the chance of a 75 basis point rate hike in November at 82.3%, up from 56.5% just a week ago. The next question may be whether market participants will begin to consider the possibility of a 100 basis point increase.
Higher growth seems unlikely, unless the October 13 September CPI report is surprisingly high. A higher-than-expected report would indicate that current efforts to curb inflation are not working as the Fed would like. The likely outcome in this scenario would be an even more aggressive rate hike.
The decline in traditional stocks is noticeable, although more in aggregate than in percentage terms. Several data points stand out on the hourly BTC chart today.
Momentum increased ahead of job postings in a gradually narrowing trading range. The post-announcement decline was exacerbated by excessive trading volume, putting downward pressure on prices.
The Volume Profile Visible Range Tool (VPVR) highlights the lack of volume between $19.900 and $19.500 for BTC.
Prices tend to move quickly through areas of “low volume nodes” like these, looking for an area where there is a greater degree of agreement on price.
The Relative Strength Index (RSI), often used to determine whether an asset is overvalued or undervalued, only reached oversold levels at 1500 UTC (1300 ET).
That BTC prices fell below the next high volume node at $19,500 is likely to worry traders as the next price level where significant agreement exists is close to $19,200.
$19,200 is perilously close to $19,000, where the open interest for puts (giving the right to sell) exceeds the open interest for calls (the right to buy). Breaking this level is likely to add additional weight to the BTC price.
Investors should keep an eye on BTC’s reaction to the move into the oversold zone, especially the trading volume. The low buying volume at the current BTC level indicates that new challenges are coming, at least in the short term.
Since stablecoins can be a dry powder for investors looking to go long, the recent rally points to bullish sentiment from investors who may just be waiting for the desired price.
On the contrary, the influx of BTC to exchanges has decreased. As a rule, the movement of BTC to exchanges indicates a willingness to sell. The extent to which this changes or remains the same over the next few days will be key to assessing the next price direction.