The US Stock Market Awaits the Publication of NFP And Unemployment Data

FXOpen

Important events of this week for investors and traders in the US stock market could be the employment news, which will be published tomorrow at 15:30 GMT+3:
→ non-Farm Payrolls (NFP) report for March. According to CNN, analysts expect nonfarm payrolls to rise by 192,500 in March. NFP for February was 275,000, according to FactSet.
→ data on the unemployment rate (Unemployment Rate). According to ForexFactory, the unemployment rate is expected to remain unchanged at 3.9%.

The state of the labour market is under close scrutiny by the Fed and could provide valuable insight into the prospects for interest rate cuts. The release of the unemployment rate and NFP numbers for March could be an example of what is called "bad news is good news" on Wall Street. After all, if the data shows a deterioration in the labour market, then this will be an argument for the Fed to lower interest rates, which in turn could lead to an increase in the stock market.

Indeed, according to CNN, Fed Chairman Jerome Powell said last week that a weakening labour market would be a reason to cut interest rates.

However, the S&P 500 chart shows the price moving within an ascending channel, but showing signs of weakness around the 5,250 level on the 4-hour period:

  • After a sharp increase in A→B, the price entered a prolonged correction B→C - this may be a sign of a large volume of sell orders near the level of 5,250, which absorbed the bullish impulse A→B.
  • An attempt to break through the level of 5,250 (price growth to top D) turned out to be a failure, as the price sharply dropped from the upper border of the channel to the lower one. Such progress should be alarming for the bears.

From the point of view of technical analysis of the S&P 500, on the eve of the publication of the NFP report, the price forms a rebound from the lower border of the channel. But by its nature, the rebound does not look dynamic compared to the previous ones (shown by arrows) — the price’s action shows that this time it needs time to approach the median line.

The above arguments provide the basis for the assumption that the publication of the unemployment rate and the NFP report for March can become drivers of price movement, at which it will form an F top.

Wherein:
→ the tops of B-D-F can form a bearish head and shoulders pattern;
→ the median line of the ascending channel and the level of 5,250 will act as resistance for the bulls.

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