U.S inflation will determine whether recent price action is corrective or a reversal

Nicky Ong Traders Corner

A lot has been said about equity markets falling over the last few weeks, but in my view the recent equity market sell-off, spike in volatility, and rise in 10-year UST yields can be attributed to one single catalyst - the latest Employment Situation Summary.

On the 2^nd February the headline NFP number came in better than expected with an increase of 200k jobs in January. However, I believe the market mover was the average hourly earnings component which rose by 9 cents to $26.74 (an annual rate of 2.9%), the fastest pace in 8 years.

With the pickup in wage growth adding to an already healthy economy, traders once again began focusing on the FED rate hike narrative. Equity valuations are trading at lofty levels yet the market in a relentless uptrend. There are many sceptics out there that don’t believe in this bull market, especially at this late stage of the business cycle which made the thought of tighter monetary policy a legitimate cause for an aggressive correction.

Is this the end of the bull market, or an opportunity to buy? That’s anyone’s guess. From a technical perspective the S&P has found support on the long term trend line and 200 day moving average confluence. I prefer to structure my portfolio with long/short ratios to hedge out market risk and certainly have exposure to gold as a longer-term play.

With the FED and their policies once again on the radar, this week’s (Wednesday CPI, Thursday PPI) inflation data will add to the already volatile environment. The 12% decline in DXY and rise in wage growth is supportive of higher inflation, but, inflation has been stubbornly low for some time now so one data print isn’t all that convincing.

What does all this mean for the markets?

Well, if inflation data fails to show any upside surprises I expect the risk off sentiment that stemmed from tighter monetary policy conditions would ease, and the market to quickly get back to the dominant trends which would see equity markets rally and the USD resume its weakness against JPY and the Euro.

A rally in DXY to the 91.00 handle prior to the CPI releases would make selling a tempting proposition.

Author

Nicky Ong

Traders Corner

Nicky Ong is a Financial Trader since 2006. Having traded his own book and managed investor funds, he strongly believes in having a logical process to allow for the consistent development of well thought out trade ideas.

EUR/USD extends its optimism past 1.1900

EUR/USD retains a firm underlying bid, surpassing the 1.1900 mark as the NA session draws to a close on Monday. The pair’s persistent uptrend comes as the US Dollar remains on the defensive, with traders staying cautious ahead of upcoming US NFP prints and CPI data.

GBP/USD tilts bullish as markets barrel toward mid-week NFP print

GBP/USD is holding a broader bullish structure on the daily chart, with price trading well above the 50 Exponential Moving Average at 1.3507 and the 200 EMA at 1.3310, confirming the intermediate uptrend that has been in place since the November 2025 low near 1.2300.

Gold pushes back above $5,000

The daily chart shows spot Gold in a parabolic uptrend that accelerated sharply from the $4,600 area in late January, printing a record high at $5,598.25 before a violent reversal erased nearly $1,000 in value during the final days of the month.

Litecoin eyes $50 as heavy losses weigh on investors

Following a strong downtrend across the crypto market over the past week, Litecoin holders are under immense pressure. The Bitcoin fork has trimmed about $1.81 billion from its market capitalization since the beginning of the year, sending it below the top 20 cryptos by market cap.

Japanese PM Takaichi nabs unprecedented victory – US data eyed this week

I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.

Ripple exposed to volatility amid low retail interest, modest fund inflows

Ripple (XRP) is extending its intraday decline to around $1.40 at the time of writing on Monday amid growing pressure from the retail market and risk-off sentiment that continues to keep investors on the sidelines.