Will the US Employment Figures Change the Fed's Rate Decision?

No major economic releases have been released over the past 24 hours, but last week’s effects continue to influence investors. Investors continue to evaluate whether the new employment figures within the US may alter the Federal Reserve’s decisions over the next two months. Most economists have advised that the Fed is unlikely to change its stance unless the market obtains disappointing news from inflation next week. If inflation does not fall as much as expected, then the Fed has the leeway to hike 0.50%, considering the strength in the employment sector. 

The asset which saw the most certain price movement over the past 24 hours was the EUR/USD. The EUR/USD has kept to the traditional trend, showing a clear downward trend. The exchange rate has formed 3 impulse waves and 4 retracements, but all have reached a lower price. At the same time, other exchange rates, commodities, and equities show a less certain movement. 

EUR/USD

As mentioned above, the EUR/USD obtained clear bearish indications throughout Friday and specifically yesterday. This morning’s price is still maintaining momentum and has also crossed onto a lower low. However, investors should also be cautious that the price has received a divergence signal on the Stochastic Oscillator and Relative Strength Index. The price has formed a higher wave on the two indicators, whereas the asset has created a lower wave. Divergence signifies where an asset continues to trade within a trend but may be close to a correction. 

EUR/USD 1-Hour Chart on February 7th 

The Euro throughout January gained momentum as the risk of a recession declined, according to economists. However, the price has been pressured by positive news from the States and negative economic figures. In December, retail sales decreased by 2.7%; by the end of 2022, the indicator lost 2.8%, which is more than expected. 

In addition to the above, the Eurozone was also pressured by this morning’s economic data. German Industrial Production for January declined by 3.1%, the most significant decline since May 2022. Also, the French Trade Balance was confirmed this morning as -14.9 Billion, which is again lower than expected. Even though economists believe the risk of recession is declining, the economic data continue to signal that a shallow recession is likely. 

The US Dollar is increasing in value against most competitors. The US Dollar Index has risen to above 103.71, a monthly high for the Dollar. The positive employment figures are triggering rumors that the Fed may become more hawkish again. Mr. Bostic has advised that a larger interest rate hike may be necessary. Investors will turn to the Chairmen’s speech for further clarification. 

However, as mentioned above, most economists agree that the Fed will hike 0.25%. However, investors should be cautious that this stays the same as it can significantly impact the US Dollar. Next week’s CPI figure will be essential for the Federal Open Market Committee. 

Tesla Inc. Stocks

The price of most US indices, including the NASDAQ, have declined over the past two trading sessions. However, traders should note that not all stocks within the US market are experiencing a slowdown in the bullish trend. Tesla is a stock that has continued increasing in value for four consecutive days. 

Tesla Stock 3-Hour Chart on February 7th 

The stock’s price is now close to renewing its price highs to a 3-month high. The stock is the best-performing stock of 2023 so far, with the instrument increasing value by more than 70%. Technical analysis indicates that the price will continue its upward trend in the long term; however, the asset is also shown as overbought on most oscillators. 

Earnings Per Share is one of the main reasons the stock increases in value. The EPS figure read $1.11, which is more than 7% higher than that expected by Wall Street. In addition, the company’s year-on-year figures mostly show strong company performance. Tesla’s year-on-year revenue has increased by 37% while Net Income is up 58%.

 The stock lost more than half its value since its highs before the Ukraine-Russia conflict. With the positive earnings figures, investors have now found the opportunity to purchase the stock at a lower price than in 2021 and 2022. 

Summary:

• The US Dollar continues to rise as some economists rumor the Federal Reserve may consider a more aggressive policy after the latest NFP figures. 
• The Euro was pressured by rising Dollar sentiment and poor economic releases. 
• FOMC Member, Mr. Bostic, confirms a 50 basis point hike is still an option, but investors are waiting for the Chairmen’s speech. 
• Bulls take control of Tesla Inc. as the stock experiences significant gains after recent earnings.