A1 Trading Company

March 7, 2024

The Bullish and Bearish Case For NFP

Frank Cabibi

We are now at a point where bad news is bad news again for the stock market and the dollar. NFP is going to be fundamental in how investors perceive a future rate cut.

EdgeFinder Analysis

We can't not talk about gold in this type of situation unfolding in the economy. The EdgeFinder has this metal placed at a +6 which is still unchanged from yesterday. The score may change tomorrow depending on the latest NFP data.

The bullish case for gold would be a lower NFP because gold's price tends to perform better based on weaker economic readings and that the US could be close to experiencing a stagflation scenario. If NFP were to come in hotter than expected, it would be a less bullish moment for the metal.

Bitcoin is now testing some strong resistance around its all time highs of $68,000. A break above this would signal a continuation of the strong uptrend. But a retracement could mean a retest around maybe the $53,000s.

In the same scenario as gold, bitcoin might actually see strength the concerns of lower economic output and higher inflation. That's why tomorrow's NFP is so important and why a beat or miss could greatly change the narrative of sentiment.

GBPUSD is now in the bullish range after gaining another point this morning. The trend is reading stronger as the dollar index continues to drop by another 0.4% today. Whether or not the Fed cuts rates due to stagflation or an expansionary environment, it still does not look very bullish for USD.

This is because investors are expecting rate cuts at some point in the near future. Whether it be for a healthy or poor economy, it's not a good look for the dollar. The stagflation scenario, however, is more bearish for USD.

Retail Spotlight

The assets with an arguably bullish stance are the ones being sold by the crowd. Meanwhile, AUDUSD, GBPUSD and EURUSD are mixed. Oil is one of the top short positions from the crowd as well.

Smart Money Spotlight

We can watch retail sentiment deteriorate over time as gold continues pushing higher towards $2,160s. Smart money is not short, but they are slowly moving some funds out of the metal and potentially taking profit.

Fundamental Spotlight

Forecasts are now projecting Europe's interest rate to stay the same while USD's is lower in the coming quarters. Because of this, the dollar is likely going to be weaker than other currencies for some time. ECB remained unchanged once again at their policy rate meeting. They believe that inflation will continue to cool with through 2025 to hit slightly lower than 2% by the end of next year.

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