(Kitco News) – Asset prices trended lower in early trading on Friday after the August jobs report showed the U.S. economy added 142,000 during the month, below expectations of 165,000, providing more evidence that the labor market is cooling.
David Morrison, senior market analyst at Trade Nation, predicted the negative reaction to the print despite it giving the Fed more justification for a rate cut at the FOMC meeting on September 18.
“Stock index futures were down sharply this morning, and there’s certainly some tension in the air,” Morrison said. “Volatility, as measured by the VIX, is back on the rise, indicating that investors are paying up for downside protection through put options on the S&P 500.”
“If today’s headline Non-Farm Payroll report comes in around or above the 161,000 expected, then that should take some pressure off,” he added. “But another disappointing release will exacerbate fears that the Federal Reserve has kept interest rates too high for too long, running the risk of a hard landing and raising the probability of a recession. That is not a positive environment for equities. So a poor number is likely to trigger more selling, which would only add to the losses already seen in this holiday-shortened week.”
More selling is exactly what happened as stocks, cryptos, and gold are all in the red at the time of writing, while the DXY whipsawed, briefly dropping to 100.585 before surging to 101.396 and now trading at 101.07.
Data provided by TradingView shows that Bitcoin (BTC) initially responded to the jobs report with a spike to $57,000 but has since reversed course sharply and now trades below $55,000, with bears emboldened to push King Crypto lower still.
BTC/USD Chart by TradingView
“The pressure on risk assets continues, pushing the crypto market capitalization back below the big milestone of $2 trillion,” said Alex Kuptsikevich, senior market analyst at FxPro. “This level acted as resistance in early February and support since May, except for a brief dip in early August. The horizontal correction pattern risks turning into a downtrend if the market breaks below the August pivot point near $1.85 trillion.”
“Bitcoin was under pressure for most of Thursday but made attempts to push back from the $56,000 level,” he added. “However, on Friday, momentum selling at the start of the active European session pushed the price down to a low of $55.25K and then stabilized below $56K.”
“Despite the dollar’s weakness, the financial markets are still in an anxious and expectant mood, which is not helping Bitcoin as much as it is helping gold,” Kuptsikevich said. “A key technical support level for the BTCUSD remains just above $54K, but slippage in the event of a volatility spike could see the price briefly drop below $53K.”
According to Leena ElDeeb, Research Analyst at 21Shares, while BTC is currently under pressure, several factors could help it recover moving forward.
“The recent U.S. labor market results acted as a moment of truth for risk-on assets like Bitcoin, as the labor market is considered the main sector that may influence the Fed's decision to cut rates this month,” she said. “A rate cut bodes well for risk-on assets, which have historically enjoyed the expansion of the investor appetite as borrowing costs decrease. However, it's not the only catalyst for Bitcoin.”
ElDeeb noted that “Global central bank liquidity, measured by M2, is a key catalyst for Bitcoin's potential breakout. Historically, Bitcoin tends to bottom out shortly before global M2 reaches its low, followed by a rapid price surge that often outpaces liquidity growth.”
“Recently, the Federal Reserve added $2B to its balance sheet, potentially signaling increased liquidity,” she said. “While past performance doesn't guarantee future results, the introduction of Bitcoin spot ETFs in major financial markets could amplify this effect. If a hard economic landing is avoided, Bitcoin and the broader market may see appreciation in Q4, driven by these liquidity dynamics.”
Legendary trader Peter Brandt noted that the Bitcoin chart shows an inverted expanding triangle pattern and warned that BTC could drop to a low of $46,000 before rebounding higher.
This is called an inverted expanding triangle or a megaphone. A test of the lower boundary would be to 46,000 or so. A massive thrust into new ATHs is required to get this bull market back on track $BTC
Selling is stronger than buying in this pattern pic.twitter.com/ekDZUJXXgd— Peter Brandt (@PeterLBrandt) September 5, 2024
And market analyst Elija Boom also warned of a pullback to the mid $40,000s in “One final dip before reversal.”
One final dip before reversal ?$BTC #Bitcoin pic.twitter.com/sMOmxuWuC3
— Elja (@Eljaboom) September 6, 2024
At the time of writing, Bitcoin trades at $54,440, a decrease of 3.64% on the 24-hour chart
