On Thursday, August 8, the US equity markets showed a significant turnaround from the previous session. The Nasdaq Composite Index surged by 2.87%, with the Dow and the S&P 500 also posting gains of 1.76% and 2.30%, respectively. These movements were largely influenced by the data on initial jobless claims and expert commentary on the state of the labor market.
According to Wall Street Journal Chief Economics Correspondent Nick Timiraos, the initial claims for unemployment benefits decreased to 233,000 last week. This drop alleviated concerns about a potential weakening of the US labor market. It is worth noting that the current claims figures are in line with historical levels from the previous year and the years 2018-2019.
Arch Capital Global Chief Economist Parker Ross offered a nuanced perspective by differentiating between initial and continuing jobless claims. He highlighted that while layoffs have been relatively normal in 2024, the time taken by unemployed workers to secure new employment has increased. This is reflected in the higher levels of continuing claims compared to initial claims, deviating from non-COVID norms.
Looking ahead to Friday, investor attention should be focused on the discussions by FOMC members. Their views on the economy, labor market conditions, and the future path of Fed interest rates could impact the demand for DAX-listed stocks. Additionally, corporate earnings reports, German inflation data, and central bank communications will play a pivotal role in shaping near-term market trends.
The potential upward revision of preliminary German inflation figures could test investor expectations of multiple ECB rate cuts in 2024. A positive inflation surprise may boost buyer demand for DAX-listed stocks. Moreover, fluctuations in the USD/JPY exchange rate, especially a drop below 145, could trigger concerns about a Yen carry trade unwind, influencing market sentiment.
Technical Analysis and Trading Strategies
In terms of technical levels, the DAX has been hovering above the 200-day EMA but remains below the 50-day EMA. This configuration suggests a bearish short-term outlook but a bullish long-term trajectory. A breakout above 17,750 could fuel a rally towards 18,000, potentially pushing the index towards the 50-day EMA. On the other hand, a break below the 17,615 support level and the 200-day EMA might lead to a test of the 17,003 support level.
The 14-day RSI indicator currently stands at 39.71, hinting at a potential decline towards the 17,003 support level before entering oversold territory. Traders and investors are advised to stay informed about corporate earnings releases, German inflation updates, and central bank announcements to make well-informed trading decisions.
The analysis of unemployment claims data and market trends provides valuable insights for market participants to navigate the current economic environment. By staying updated on key indicators and expert opinions, traders can adapt their strategies to capitalize on emerging opportunities and manage risk effectively.