(Kitco News) – Financial markets trended higher in early trading on Thursday after the latest weekly initial jobless claims came in better than forecasts, providing reassurance to investors that the U.S. labor market remains healthy following last week’s dismal non-farm payrolls report.
Data provided by the Department of Labor showed that 233,000 initial jobless claims were filed in the week ending Aug. 3, down from 250,000 the week prior and below the 240,000 claims economists had expected. This helped lower the fears of an imminent recession after the jobless claims for the week ending July 27 hit their highest level since August 2023.
But one positive employment report is not enough to overcome the negative sentiment that has been building in recent months, and increased volatility is expected to be a market feature for the time being.
“There’s now a growing concern that the expected bounce-back from the recent rout has failed to materialise,” said, David Morrison, senior market analyst at Trade Nation. “Part of this may be due to the time of the year, given that we’re in the peak summer holiday period. But it’s also the case that investors are wary that there may be further unwinding of the yen carry-trade.”
“In addition, there are fears that the tech sector remains expensive despite the latest sell-off, and this feeling has been compounded by a less than stellar set of Q2 earnings reports and forward guidance, particularly from the ‘Magnificent Seven,’” he added. “All-in-all, there seems little reason to rush back into equities.”
“Certainly, the bond market isn’t signaling any urgency to take on more market risk,” Morrison said. “Yields have fallen sharply as investors price in aggressive rate cuts, while parking funds in the relative safe haven of US Treasuries. Could this be a postponement of the fight back, rather than a cancellation? Sure. But volatility remains elevated and investors are nervous.”
Bitcoin (BTC) responded positively to the initial jobless claims data, extending its recovery back above support at $59,000 as bulls looked to make up for lost ground following Monday’s 15% pullback.
BTC/USD Chart by TradingView
According to JPMorgan analysts led by managing director Nikolaos Panigirtzoglou, institutional investors have played a key role in Bitcoin’s recovery so far as they have shown little to no de-risking in Bitcoin futures despite the broader market turmoil.
The JPMorgan futures position indicator, which tracks cumulative open interest in CME Bitcoin futures contracts along with the positive slope of the futures curve, shows that institutional investors remain bullish, the analysts said in a report on Wednesday.
They pointed to the fact that the Bitcoin futures price premium was higher than the spot premium, which indicates confidence from futures investors.
Reasons for the optimistic outlook include the announcement from Morgan Stanley that its wealth advisors can now recommend spot BTC exchange-traded funds (ETFs) to clients, the belief that the worst of the liquidations from the Mt. Gox and Genesis bankruptcies are behind us, and the expectation that the pending FTX cash payments to creditors will be reinvested into the crypto market, boosting demand.
They also highlighted that both major U.S. political parties have signaled support for favorable crypto regulations, which bodes well for the future of the asset class.
Despite these catalysts, which the analysts said were likely already priced in, JPMorgan remains cautious about the crypto market moving forward as the ongoing vulnerability in equity markets could negatively impact digital assets if the weakness continues.
According to market analyst Roman, the Bitcoin recovery is going well so far, but he is “Still expecting a 60k retest then a dump back to lows before we attempt to get a potential reversal.”
The chart provided by Roman shows Bitcoin climbing to $60,000 before stair-stepping its way down to support at $54,000. “Price action proving bearish as well (volume down + price up) so I’m expecting a down once we hit resistance,” he said.
Renowned trader Peter Brandt said he sees a 50% chance that Bitcoin will drop below $40,000 before the next rally higher.
It will be my honor to record a video today for @RealVision @RaoulGMI to discuss this chart. I believe there is a 50% chance $BTC visits sub-$40k before the last half of the halving plays itself out pic.twitter.com/FJGuYKlvXC
— Peter Brandt (@PeterLBrandt) August 8, 2024
And market analyst CryptoKnight also sees the potential for a choppy pullback to the $46,000 - $50,000 range before a rally above $100,000.
$btc next possible scenario in my view
chop chop to 46-50k then pump to 100k in october to December pic.twitter.com/1vPenzo5ao— KNIGHT $INJ TO 100$ (@cryptoknight890) August 8, 2024
At the time of writing, Bitcoin trades at $59,045, an increase of 5.36% on the 24-hour chart.
