Markets corrected as U.S. jobs data reflected a stubbornly robust labor market, adding further confirmation
Markets corrected as U.S. jobs data reflected a stubbornly robust labor market, adding further confirmation to investors’ belief that the Federal Reserve will continue with its aggressive rate hikes.
The United States nonfarm payrolls increased by 263,000 in September, marginally below the Dow Jones estimate of 275,000, but the unemployment rate dropped to 3.5% compared to the forecast of 3.7%.
Some analysts believe the report shows that the jobs market remains strong in spite of the Federal Reserve’s efforts to slow down the economy and that could encourage the Fed to go ahead with another aggressive rate hike in its next meeting in November. This led to a sharp fall in the U.S. equities markets on Oct. 7.
Although Bitcoin (BTC) has traded in close correlation with the U.S. equities markets for most of 2022, it could change in the second half of the year and Bitcoin could “shift toward becoming a risk-off asset, like gold and US Treasury’s,” said Bloomberg Intelligence senior commodity strategist Mike McGlone in the Oct. 5 Bloomberg Crypto Outlook report.
Let’s study the charts of the S&P 500 index, the U.S. dollar index (DXY) and the major cryptocurrencies to determine the short-term price outlook.
SPX
The S&P 500 index (SPX) plunged and closed below the June low of $3,636 on Sept. 30, but the bears could not sustain the lower levels. Buyers aggressively purchased the dip and pushed the price back above the breakdown level of $3,636 on Oct. 3. This may have caught the aggressive bears off-guard resulting in a short squeeze, which pushed the price to the 20-day exponential moving average (EMA) ($3,779) on Oct. 4.
In a bear market, experienced traders continue to sell on rallies and that is what happened with the index. The bears stalled the recovery at the 20-day EMA and the price turned down sharply on Oct. 7.
The zone between $3,636 and $3,584 is vital for the bulls to defend because a break and close below it could signal the resumption of the downtrend. The index could then decline to $3,500 and thereafter to $3,325.
Conversely, if the price rebounds off the support zone, it will suggest accumulation by the bulls at lower levels. Buyers will then again try to push the price above the 20-day EMA. If they succeed, the index could rise to the downtrend line.
The bulls will have to overcome this barrier to indicate that the short-term corrective phase may be over. The index could then start a rally to $4,100.
DXY
The U.S. dollar index remains in a strong uptrend. The sellers pulled the price below the 20-day EMA (111) on Oct. 4 but could not sustain the lower levels. Aggressive buying on dips pushed the price back above the 20-day EMA on Oct. 5.
The bears are trying to stall the up-move in the zone between the 50% Fibonacci retracement level of $112.41 and the 61.8% retracement level of $112.96. If the price turns down sharply from this zone, it will suggest that traders are selling on rallies. That could again pull the price to the 20-day EMA and then to $110.05.
If the support at $110.05 gives way, it will suggest that the short-term bullish momentum has weakened. The price could then drop to the uptrend line. A close below this support could indicate that the index may have topped out.
Instead, if bulls drive the price above $112.96, the index could retest the multi-year high at $114.77. A break above this resistance could suggest the resumption of the uptrend. The next target on the upside is $117.14.
BTC/USDT
Bitcoin’s relief rally is facing strong resistance in the zone between the 50-day simple moving average (SMA) ($20,019) and the downtrend line. This shows that bears are selling on rallies and will try to pull the price to $18,626.
The repeated retest of a support level tends to weaken it. If bears sink the price below the strong support at $18,626, the BTC/USDT pair may witness panic selling. That could open the doors for a possible retest of the June low at $17,622.
To invalidate this bearish view, the bulls will have to push and sustain the price above the downtrend line. If that happens, the bullish momentum could pick up and the pair could rally to $22,799. The bears may pose a strong challenge at this level.
ETH/USDT
Ether (ETH) has been trading near the 20-day EMA ($1,364) since Oct. 4. The bears are defending the level but a positive sign is that the bulls have not given up much ground. This suggests that buyers expect the recovery to extend further.
If buyers thrust the price above the 20-day EMA and the horizontal resistance at $1,410, the ETH/USDT pair could rally to the resistance line of the descending channel. This level may attract strong selling by the bears.
If the price turns down sharply from the resistance…
cointelegraph.com