Market Pulse: Unemployment Is Rising

Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.

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TLDR:

• Nonfarm Payrolls diverged; -105k (Oct), 64k (Nov).
• Unemployment exceeded target; November at 4.6%, above Fed's 4.5% year-end forecast.
• Fed on hold; Rate cuts unlikely in the immediate term.
• $77k–$82k zone; Remains accumulation for BTC, $70k–$80k seen as strong value.

Jobs Data:

• Non Farm Payrolls October: Forecast 55k, Actual -105k
• Non Farm Payrolls November: Forecast 25k, Actual 64k
• Unemployment Rate November: Forecast 4.6%, Actual 4.6%

Expectations going into the print were that we may see a downside surprise here, and that's what we got in the Unemployment Rate. October's Nonfarms data is very peculiar and messy, so it'll likely be dismissed by the markets. So, the attention turns to the November data, which saw 64k jobs added, but the Unemployment Rate tick up to 4.6%.

The risks for risk assets going into today's print were, should we see a greater deterioration in the labour market, more interest rate cuts would get priced in. However, more cuts due to economic weakness (rather than cutting rates just to bring the rate down to neutral) wouldn't be a positive outcome for those risk assets. We're seeing the US2Y Yield move down by just a few basis points. So, we're seeing a weakening meaning the Fed can cut rates in the near-term, but it might not mean that a January cut can happen, more likely a March cut.

This probably isn't enough for risk assets in the short-term.

Market Reaction:

The Nasdaq and BTC have moved up slightly on this, but we don't see this data as being enough that it means that the Fed are behind the curve and should be cutting interest rates aggressively.

Likely for now, that a January cut doesn't happen, and therefore that's not supportive for risk assets.

Positioning:

We still remain cautious considering BTC's flows aren't yet supportive of prices moving higher. And today's data isn't weak enough that it suggests more cuts are coming, despite the fact that the data is showing a continued weakening, just not enough for a cut in the near-term, and therefore our positioning remains the same = we expect lower, and only at lower prices would we be strong buyers.

Cryptonary’s Take:

Ultimately, this data shows a further weakening, but not enough that it would suggest to the Fed that they're "behind the curve". For this reason, we don't see further monetary policy in the immediate term which could have been accommodative for risk assets.

Therefore, we return back to the fundamentals and key drivers of BTC, which is the flows. That is not yet supportive, and therefore our bias remains the same. Continued chop, but likely lower, and should price retest $77k-$82k, that's where we'd be buyers.