Today's stronger-than-expected jobs report puts the Federal Reserve in a difficult position. With unemployment steady at 3.8% and non-farm payrolls handily beating expectations, the labour market appears resilient despite the Fed's attempts to slow inflation through interest rate hikes. 

Markets reacted swiftly, with bonds selling off, yields rising, and risk assets like equities under pressure. Let’s dive into how this translates into risk assets and, more importantly, what this means for BTC. 

TLDR 📃 

• Jobs data beat expectations, showing a resilient labour market despite Fed tightening
• Increased likelihood of further Fed rate hikes and quantitative tightening
• Bonds sold off on data, yields rose; risk assets like equities under pressure
• Short-term upside is still possible for Bitcoin, but there are stronger headwinds ahead for risk assets

Disclaimer: Not financial or investment advice. Any capital-related decisions you make are your full responsibility.

Today's economic data 

At 1:30 pm UK time today, we saw the release of the U.S. Unemployment Rate and Non-Farm Payrolls report. Unemployment was expected to come in at 3.8%, and that's exactly how it came in. 

The major upside surprise was Non-Farm Payrolls, the number of jobs added in the U.S. in September. The forecast was for it to come in around 180k, yet it came in at 336k. This shows that the labour market is still adding jobs each month and is far more resilient than the Fed would have hoped. 

A strong labour market is inflationary... The main mandate Fed right now is to combat inflationary pressures. Either the Fed has to raise rates further, or more tightening is needed to keep inflation in check. 

The Bond market is currently doing some of the Fed's work and tightening for them. We immediately saw the U.S. 10Y and U.S. 30Y Bond sell-off and Yields go higher. As a result, DXY went higher, and the S&P came down slightly. However, it has since bounced back. 

Mid and long-term, we don't think this jobs data released today is positive for risk assets. It essentially means we'll need more tightening from the Fed. It also increases the possibility of something breaking in the financial markets.

 Again, this is a real headwind going forward that could tank risk assets. Financial stability is another mandate of the Federal Reserve, so if something breaks, they'll likely step in.

How does this affect BTC? 

In the very short term, we still feel the DXY can pull back, and Equities (the S&P) can get some relief, which should help BTC get some relief.

However, this pullback will likely negatively affect liquidity conditions over the mid and long-term (next 1-3 quarters). The only exception is if the Fed steps in again and injects liquidity to keep the markets whole. But for now, the Fed isn't close to doing this. So, in the next 1-2 weeks, our feeling is BTC can go higher as the S&P bouncing can just drag it up.

However, if the S&P rejects the $435 - $440 level, this may coincide with the next price top for Bitcoin. In essence, the top could be $28,300, or it may even be slightly higher towards $29,000.

We are confident that we won't see a big move higher for Bitcoin north of $32,000. $30,000 could be on the cards, but we still feel this is highly unlikely. 

$28,300 - $29,000, we feel, will be the next local top for BTC.