The US dollar rose alongside Treasury yields and stock markets fell after the US reported a surprisingly strong September jobs report. It is raising the odds of further US Federal Reserve hikes before the end of the year. Therefore, the bulls had the opportunity to move the USD/JPY currency pair towards the resistance level of 149.53, recovering from the selling operations it faced during the week that pushed it towards the support level of 148.25. This is after it tested the peak of 150.16 and amid news of Japanese intervention in the markets to prevent further collapse of the Japanese yen. in the markets.
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Last Friday, the US Bureau of Labor Statistics announced the creation of 336,000 additional jobs in September, compared to the 171,000 jobs the market expected. Commenting on this, Fouad Razaqzadeh, market analyst at City Index, says: “The US dollar jumped initially, while index futures fell sharply as the data raised the possibility of interest rates remaining high for a longer period.”
According to trading following the report, the euro fell below 1.05 to reach 1.0490 amid a widespread offer to buy the dollar, while the ten-year Treasury bond yield rose to 4.85%, raising concerns again that the financial system is at risk of instability due to the rapid rise in borrowing costs.
Commenting on the exciting US jobs report. “The big upside surprise in job creation, combined with such broad-based gains, will lead to a sell-off in both stocks and bonds, especially since labor force participation has not risen in any meaningful way,” says Mohamed El-Erian, head of Queen’s College, Cambridge University, and an advisor to Allianz. Despite broadly consistent profits. “The Fed has emphasized that it is data-driven, and this will put a US rate hike back on the table for markets on November 1.”
Falling stock markets are usually supportive of the “safe haven” dollar, adding to demand already generated by rising bond yields. Meanwhile, average hourly earnings fell by 0.2% on a monthly basis, versus 0.3% expected, bringing the annual rate to 4.2% compared to 4.3% expected.
Overall, the US jobs report was strong, and the initial market reaction was quite reasonable. But what we don't know are the inevitable revisions we will witness next month. The fact that wages are growing less than expected does not lead to a sharp increase in the unemployment rate. The prospects of another interest rate increase before the end of the year, despite the headlines. Some analysts say it is surprising to see the US labor market so strong despite aggressive monetary tightening by the Federal Reserve, and this does not bode well for those hoping to see more flexible monetary policy anytime soon. Therefore, the US dollar is likely to remain rising since this data unambiguously supports expectations of a “longer rise” for US interest rates, which have confirmed their progress since July.
Ultimately, the pound, euro, yen and other G10 currencies are likely to remain under pressure until data suddenly starts to trend downward in response to a slowing economy, or rising bond yields create problems throughout the financial markets.
Expectations for the dollar against the Japanese yen today:
- According to the performance on the daily chart below, the general trend of the US dollar against the Japanese yen (USD/JPY) is still bullish.
- After last week’s selling operations, the general trend will remain bullish as long as the discrepancy continues between the hawkish US Federal Reserve and the interest-bearing Bank of Japan.
- Now there is an opportunity to move to breach the psychological resistance of 150.00, and there may be many if the US inflation numbers and the content of the minutes of the last meeting of the Federal Reserve Bank are supportive of more US interest rate hikes.
- The closest resistance levels for the currency pair are currently 149.85, 150.50, and 151.20, respectively.
I expect a quiet trading session today amid an American holiday. You should take into account any Japanese hints about the currency exchange rate.
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