Here’s how Friday’s US jobs report could affect the Bitcoin (BTC) price

by James · April 6, 2023

The US job market report for March is set for release on Friday and has the potential to really shake things up in the Bitcoin market.

Traders will closely scrutinize the nonfarm payrolls numbers (the net change in jobs in the economy), which are expected to moderate to 239,000 from 311,000 a month ago, as well as measures of slack in the labor market and wage growth.

Measures of labor market slack such as the unemployment rate show that the US labor market, at least so far, has been in historically good health over the past year or so.

The unemployment rate remained near a multi-decade low of 3.6% in March

Wage growth, meanwhile, continues to run at a pace well above the Fed’s 2.0% inflation target, although it has admittedly slowed in recent months, with further easing expected on Friday.

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Key US jobs report follows a string of weak US data releases

US labor market data released so far this week ahead of Friday’s report have generally surprised to the downside, and as a result most analysts expect Friday’s report to also come in weaker than expected.

JOLT data on Tuesday for February showed that job vacancies in the US economy (a good proxy for labor demand) fell to a two-year low below 10 million.

Payroll company ADP’s estimate of the net change in U.S. employment surprised to the downside on Wednesday, and annual revisions to the number of weekly jobless claims filed in the U.S. on Thursday looked up.

Weak labor market data this week comes on the heels of two weaker-than-expected ISM PMI reports – the first, released on Monday, showed the US manufacturing sector in a deeper-than-expected contraction.

The second, out on Wednesday, showed growth in the US services sector slowing to a near standstill.

Recession and Fed Cut Cycle Bets Rise

All told, the poor data this week has led to expectations that 1) the delayed effects of the Fed’s tightening over the past 12 months are finally being felt across the economy and a recession later this year is likely on the way and 2) the Fed will soon cut interest rates as consequence of this.

March’s banking crisis and the chilling impact this is expected to have on lending in the coming quarters further increases the downside risks facing the US economy, further strengthening the case for a Fed tapering cycle.

These are macro themes that have weighed heavily on the US dollar and US interest rates in recent weeks and have been strongly supportive of the Bitcoin price.

While BTC/USD has gone sideways near $28,000 over the past three weeks, it’s still up in the 70% range for the year and up a staggering 43% from last month’s lows below $20,000.

Friday’s US jobs data will be seen through the lens of how it affects these macro narratives – data showing a weakened US labor market will strengthen the case for the Fed to cut to stave off a suspected incoming recession.

On the other hand, stronger-than-expected data could ease some recession worries and lead to a resumption of Fed tightening.

For what it’s worth, according to CME’s Fed Watch Tool, US money markets are currently assigning a near 50/50 probability that the Fed will raise interest rates at its meeting next month, with this hike (should it go ahead) seen as the last of the cycle.

Money markets are also assigning a roughly 50% chance that the Fed will have cut rates at least 25bps below their current level (of 4.75-5.0%) by July, before cutting rates to around 4.0% before the end of the term. year.

How Friday’s data will affect crypto

This is an unusual US jobs report, given that US markets will be closed on Good Friday.

Normally, crypto takes its cue from the reaction of the US dollar, US interest rates and US stock markets.

But the likes of Bitcoin won’t have these asset classes to monitor and trade from.

Due to the holidays, liquidity will also be thin, so expect trading conditions to be very choppy and unpredictable.

In terms of the playbook for market reactions, it will likely look something like this:

Stronger than expected jobs report = Weaker crypto (as US dollar, yields and Fed tightening bets rise).
In line with expectations = Neutral market reaction.
Weaker than expected jobs report = Stronger crypto (as US dollar drops interest rates and Fed tightens).

As mentioned in recent articles, Bitcoin is very well prepared for a breakout from a technical point of view, having recently formed a pennant structure.

A stronger jobs report could be the catalyst to push Bitcoin back down towards support-turned-resistance in the $26,500 area, or even support around $25,500.

A weaker-than-expected report could push Bitcoin past recent highs in the mid-$29,000s, above $30,000 and further towards the key resistance area of $32,500-$33,000.

Of course, there is always a risk that a weak report hurts Bitcoin as people worry about an incoming US recession, and that a strong report helps Bitcoin as people fear the recession is easing.

But in the longer term, economic conditions and what happens with the Fed are more important to Bitcoin than economic growth.