Bitcoin / Source: Adobe
US jobs data for May are expected on Friday 2nd June.
The data, which is being closely watched by Federal Reserve policymakers, could trigger volatility in the Bitcoin market depending on how and if it impacts expectations of further Federal Reserve rate hikes.
According to the media of a series of economic surveys, the labor market is expected to have added 193,000 jobs in May, slightly slower than the 253,000 jobs added in April.
Meanwhile, the unemployment rate is expected to rise to 3.5% from historic lows of 3.4% and the pace of mom earnings growth is expected to moderate to 0.3% from 0.5%.
Should the data come in as expected, it would suggest that the US jobs market will continue to perform well, contradicting the notion that the US is on the verge of a recession.
That could weigh on cryptocurrencies like bitcoin if it causes markets to rekindle expectations of further Fed tightening.
However, recent communications suggest that even if Friday’s jobs report beats expectations, that may not be the case.
Fed signals likely to be broken at this month’s meeting
The Fed policymaker and nominee is set to take over the post as Vice Chairman Philip Jefferson on Wednesday expressed his preference for a pause in the Fed’s rate-hiking cycle at the upcoming meeting this month.
“Skipping a rate hike at an upcoming meeting would allow the committee to look at more data before making decisions on the extent of further monetary tightening,” Jefferson said.
His comments echoed those recently shared by Fed Chair Jerome Powell in a speech last month.
Powell cited a desire to see the lagged effect of rate hikes over the past 15 months and concerns about tighter credit conditions in the wake of March’s mini “banking crisis” as reasons for more caution.
According to the CME’s Fed Watch Tool, US interest rate futures markets suggest the Fed has an 80% chance of keeping interest rates unchanged at 5.0-5.25% this month, despite some Fed policymakers expressing a preference for one have expressed further tightening.
Given recent communications from key Fed policymakers such as Jefferson and Powell, even a good jobs report is unlikely to change these expectations significantly.
However, downside risks remain in the bitcoin price
But a much stronger-than-expected jobs report could still undermine expectations for Fed rate cuts before the end of 2023, which could weigh on Bitcoin.
The CME’s Fed Watch Tool currently estimates there is over a 65% chance that the Fed will cut rates by at least 25 basis points from current levels by the end of the year.
A strong jobs report could thus amplify the recent bearish trading bias seen in the bitcoin market.
Prices were last seen in the $26,800 area, almost right on the 100-day moving average and slightly below the 21DMA.
Techs remain broadly bearish given Bitcoin’s recent rejection of the 50DMA and a downtrend from yearly highs of a low $28,000.
Many believe a retest of the recent lows below $26,000 is likely and that Bitcoin could be in the process of forming a descending triangle structure, the break of which to the downside could trigger a test or even sink of key long-term support in the low-25,000- dollar area.
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