Overall risk sentiment is on the positive side as market focus turn to non-farm payroll report today. The messages from Fed and BoE this week were clear that the tightening cycle is close to a peak. It’s just a matter of 4.75-5.00% or 5.00-5.25% for Fed, and 4.25% or 4.50% for BoE. While ECB is still staying the course and at least two more hikes are on the card according to unnamed source, rate will peak below 4% handle.
Markets are expecting 193k NFP job growth in January, with unemployment rate ticked up from 3.5% to 3.6%. Average hourly earnings are expected to grow 0.3% mom. For investors, the ideal scenario is solid job growth, with gradual uptick in unemployment rate and modest wages growth. That scenario would keep Fed on track to pause in Q2.
NASDAQ rally has been rather impressive, up 16% year-to-day, logging the best performance since 1975. Based on current momentum, 38.2% retracement of 16212.22 to 10088.82 at 12427.95 should be taken out with ease for the near term. The real test is on 13181.05 cluster resistance (50% retracement at 13150.52). Sustained break there will build up the case of bullish trend reversal. But in any case, further rally will be expected as long as 11388.54 support holds. Meanwhile, solid risk-on sentiment could continue to limit Dollar’s rebound.
