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The market closed with a P-shaped profile structure, reflecting late-session long liquidation that brought price back toward the session lows after initial buying pressure driven by weaker job-market data and an improved rate-cut outlook. With price now trading well below the POC, the level remains a likely target for a revisit as the auction seeks to rebalance.
 

On today’s economic front, traders await jobless claims data to further refine the rate-path outlook. The market is currently pricing roughly a 90% probability of a rate hold, largely due to elevated inflation risks. Any additional weakness in labor data could lift the odds of a surprise cut, improving sentiment and supporting risk assets.

The emerging New Year macro regime shows continued capital inflows into Bitcoin and copper, both supportive of broader risk-on conditions. The Russell 2000 is up approximately 3%, reinforcing the bullish tone. However, a firmer U.S. dollar, driven by expectations of a rate hold—remains a potential headwind, while a roughly 6% rise in the VIX introduces short-term caution.

Despite these pressures, the broader rate-cut path remains dovish, favoring buy-the-dip scenarios. Yields reflect growth concerns within a still-dovish trajectory, and credit markets remain constructive. At the same time, rising TIPS highlight persistent inflation risks.

Overall, risk appetite remains intact but with early signs of fragility. Near-term direction will likely be clarified by incoming labor data, culminating in Friday’s employment report.

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