Key Points
- US NFP came in hot at 254,000, above the expected 147,000.
- The market now sees only a ¼ point Fed rate cut in November.
- Pullback buys in silver may come into play ahead of next week’s US CPI report.
Market Overview
US Non-Farm Payrolls for September are in, shattering all expectations. Massive participation quickly became the rule as volatility slammed equities and commodities alike. For silver (XAG/USD), prices fell, then rallied as traders pondered the impact of a stronger Greenback.
US Non-Farm Payrolls
The 4 October 2024 US NonFarm Payrolls release was one of the most significant events on the year’s economic calendar. Why? It was the second-to-last jobs report ahead of the 2024 US Elections. There was a lot at stake as politicians, economists, and traders gauged the relative strength of the US economy.
September NFP came in at an epic 254,000, smashing the 147,000 projected. The surprise employment build crushed August’s number by more than 100,000, sending the Unemployment Rate down by 0.1%. The uptick in labor left analysts scratching their heads.
Perhaps more perplexing were the revisions made by the US Bureau of Labor Statistics (BLS). Year-to-date, the BLS has downwardly revised NFP numbers by roughly 800,000 jobs. For September, the BLS posted upward adjustments for July (55,000) and August (17,000), a total of 72,000 higher than previously reported.
The bottom line is that the hot NFP report suggests that the USD may be undervalued and metals may be overpriced.
The Policy Debate Kicks Off
Central bankers have a dual mandate. First, their policy moves must ensure pricing stability. Second, their policy moves must promote maximum employment. This is done by balancing target inflation (2%) and optimal employment rates.
Friday’s NFP number has ignited a voracious debate over the current state of Fed policy. Last month, the US Fed slashed rates by a historic ½ point. After the hot NFP reading, many in the markets question whether this move was premature. At press time, the CME FedWatch Index assigns a 95% of only a ¼ point rate cut in November. This is up from the near 50/50 probabilities we saw early in the week.
NFP has signaled that the FOMC may have been too aggressive. Ultimately, this sentiment suggests a rally in the Greenback may be in the offing, which could send metals lower.
XAG/USD: Technical Outlook
Economic events such as NFP are huge market movers. Often, it’s better to let the dust settle before piling on leverage. Given the fundamentals, a pullback buy may come into play for silver in the near future.
All in all, a bullish bias is warranted for silver. However, buying at market prices (approximately 32.57) is challenging in fear of bidding the top. So, bidding from an area of natural support isn’t a bad play. Given the current silver market dynamic, the order block outlined on the chart (31.00 – 30.88) is a legitimate buying opportunity.
Next week, US CPI is the premier market driver. For silver, this will be a key element in what is a fascinating Autumn dynamic.
Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.
