Renewed fears of a “hyperinflation” dystopia have the U.S economy on edge ahead of the U.S Non-Farm Payrolls (NFP) report this Friday the 7^th of May 2021 around 14:30 SAST.

Even though the U.S economy isn’t even close to a hyperinflation scenario, market participants have been on edge due to inflation concerns which could spark rate hikes earlier than anticipated. These fears were amplified on Tuesday as “U.S. Treasury Secretary Janet Yellen said rate hikes may be needed to stop the economy overheating.” - Reuters

Profit-taking was high on the agenda after Yellen’s remarks which sent the Nasdaq lower by 1.9% which was curbed slightly by Asian holidays. Commodities are back in favour with copper reaching new highs and Crude Oil regains a seven-week high as countries open borders.

Here is what’s expected this week:

The U.S Non-Farm Payrolls (NFP) 

The U.S jobs sector comes back into focus this week after a solid increase over the last month which has prompted some analyst to call for U.S payrolls to rise by a million jobs.

Jobs number:

The number of new Non-Farm jobs for the month of April is expected to come in slightly higher than the previous reading for Mach 2021 at 916K. 

• One million new jobs could be added to the payrolls this Friday but overall, the U.S Non-Farm Payrolls data is expected to increase to 980K employed for the month of April 2021. 

Hourly earnings:

The Average hourly earnings (M/M) (Apr) data is expected to increase to 0.1% while the Average hourly earnings (Y/Y) (Apr) is also expected to decline to -0.4% from the previous month's number.

U.S. Unemployment Rate:

The U.S. Unemployment Rate measures the percentage of the total workforce that is unemployed and actively seeking employment during the previous month.

The U.S. Unemployment Rate is watched closely for signs of economic recovery and is expected to decrease to 5.8%. 

Why is the jobs number important?

The Non-Farm Payrolls report (NFP) is treated as an economic indicator for people employed during the previous month, and the number being released will have a direct impact on the markets. In the United States, consumer spending accounts for most of the economic activity, and the Non-Farm Payrolls report represents 80% of the U.S. workforce. Farmers are excluded from the employment figures due to the seasonality in farm jobs. 

The Wall Street 30 Technical Analysis

The Wall Street 30 (WS30) price action has remained in a consolidated state over the last week with the 34237-resistance level in focus for a breakout. As mentioned in our previous WS30 note the support and resistance levels have been watched for breakouts that did not come to fruition.

If the U.S economic situation remains stable, then we might see a breakout to new highs which has prompted me to add a new possible target price at 34994 over the short term. All other levels of interest remain in place until we see a breakout with a throwback of the 34237-resistance level.

• The price action is testing the resistance level at 34237 which is still holding. We have raised our new possible target price to 34994 over the short term.
• The 50-day SMA (blue line) is supporting the price action higher on the 4H chart.
• The Relative Strength Index (RSI) is above the 50-mark and is pointing higher.

Chart Source: Wall Street 4H Timeframe  - GT247 MT5 Trading Platform

Trading term of the day

Hyperinflation

Hyperinflation is a term to describe rapid, excessive, and out-of-control general price increases in an economy. While inflation is a measure of the pace of rising prices for goods and services, hyperinflation is rapidly rising inflation, typically measuring more than 50% per month. Although hyperinflation is a rare event for developed economies, it has occurred many times throughout history in countries such as China, Germany, Russia, Hungary, and Argentina. - Investopedia

Take note: The outlook and levels might change as this outlook is released during the current days (Wednesday the 5^th of May 2021) U.S Market open.

Sources – MetaTrader5, Reuters, Investopedia

Barry Dumas | Market Analyst at GT247.com

Barry has 12 years experience in the financial markets. He enjoys educating clients on trading / investing and providing punchy technical analysis on securities. He currently holds a Wealth Management qualification and is studying towards becoming a Chartered Market Technician® (CMT) designation holder.

Disclaimer:

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