US Stocks Slip; Dollar Weakens, Gold and Oil Rise Ahead of NFP – Comments from Century Financial

On Tuesday, Retail sales unexpectedly stalled in December. The value of retail purchases, unadjusted for inflation, was little changed after a 0.6% gain in November. The figures indicate that there was a short-lived burst of activity at the beginning of the holiday-shopping season. However, households continue to be frustrated over the high cost of living and worries about the job market persist.

Concerns around AI has been a big theme over the last few sessions, particularly as investors rotate into less risky and speculative areas of the market. Software stocks, which sold off due to fear of disruption from AI, are now expected to rebound in the near term.

Trading is expected to be slow today as investors will be less likely to take large new positions ahead of the NFP jobs report today. Stock futures for the S&P 500 and Nasdaq 100 are marginally up today.

From a technical perspective, the index is trading above the 9 and 21 SMA on the daily chart. The RSI is around 52, indicating that bullish momentum is slowly building after last week’s pullback. On the 4-hour chart, immediate support is at $6,889 (100 SMA), followed by $6,804 (200 SMA).  Immediate resistance is at the all-time high level of $7,002. A break above this level could send the index to $7,124, which is the 1.618 level on the Fibonacci extension connecting the low of 20 Jan, the high of 28 Jan, and the low of 5 Feb.

The US Retail Sales data released yesterday revealed a much weaker print at 0.0%, compared to the 0.4% expected, while core retail sales came in at 0.0% compared to 0.3% expected. Although the next FOMC meeting in March is expected to hold interest rates steady, the odds of a rate cut have increased sharply following the macro print, which rose to 21.1% from 9.4% just a week ago, according to the CME FedWatch Tool. This contributed to the headwinds for the US dollar. Following mixed economic data recently, today’s US Nonfarm payrolls report is expected to have heightened investor interest. Even though economists forecast an increase in payrolls, the January release will include an annual revision to the jobs count. This is expected to reveal a notable downward revision to payroll growth in the year through March 2025, which is likely to raise interest rate cut odds further, not boding well for the dollar.

From a technical standpoint, the dollar index has broken below a long-term upward-sloping trendline on the monthly chart starting from 2011, with touchpoints in 2021 and 2025. The 200-SMA on the same timeframe might provide critical support around the 95.98 level, below which a bearish long-term trend might be confirmed. The last leg of potential short-term support may come from the lows of 27th Jan around the 95.55 level, after which prices may test levels from 2022. The EUR/USD pair remains well supported above the 9-SMA level on the daily and weekly charts, suggesting its strong market structure at the moment.

This year, geopolitical tensions have led to a 10% increase in oil prices, even though long-term fundamentals point to a supply glut. This week, attention remains on OPEC’s monthly report outlining the outlook for the global crude oil markets. This will be followed by the IEA’s revised oil outlook. On the technical front, Brent is up 0.5% at $69.38. Sustained moves above $69.50, marked by the early Feb highs, could push Brent to $72.52. The commodity has immediate support at around $68.28, followed by the next support at around $67.32. WTI is up 0.6% at $64.60, with potential resistance levels at $65.10 and $65.67, and support at around $63.52.

Today’s upside has tailwinds from U.S. retail sales data, which were flat in December after a 0.6% increase in November, missing expectations of a 0.4% rise, indicating that consumers are nervous. Investors are trading cautiously ahead of today’s U.S. NFP release. Due to previous weaker datapoints on jobs, markets are expecting a softer print from NFP as well. Another data point to consider will be the yearly revisions to the NFP, which have mostly been on the downside, suggesting that the figures initially reported have been slightly overstated. Is jobs market slowdown impacting consumer spending? A lower NFP print today, with downward revisions, could bolster expectations that the Fed will lower interest rates at least twice this year, likely paving the way for precious metals to rise further and for the U.S. dollar to play defence.

On a 4-hour timeframe, gold is holding above the 9-day SMA at $5,039. The next support is likely around the 21-SMA, close to $5,000. The RSI is around 58 (neutral-to-bullish), suggesting positive momentum. A resistance test could appear in the $5,100-$5,200 zone with 61.8% retracement (measured from the $5,597.89 high to the $4,401.99 low) at $5,141.05, capping the next leg higher.