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US Jobs On Watch
The latest set of US labour market data tomorrow is drawing plenty of attention. While the NFP is typically one of the most market-moving data points each month, given the shift in Fed expectations we’ve seen recently, tomorrow’s data might prove even more eventful. Traders will be looking to tomorrow’s data as a guide for how the Fed is likely to act at the FOMC this month. On the numbers front, the market is looking for the NFP at 193k down from 253k prior.
NFP & The Fed
The general thinking with the NFP is that a positive reading indicates strength in the US economy and leans into a Fed tightening narrative. In this scenario the Fed is likely more inclined to lift rates or hold off from easing rates depending which cycle its in. Conversely, if the NFP comes in below forecasts, this suggests that the US economy is losing steam and creating fewer jobs. In this scenario, the Fed is more likely to ease rates or hold off from tightening them, again, depending which cycle the bank is in.
Market Implications
Ahead of tomorrow’s data, the Fed has been engaged in a tightening cycle over the last year or more. Over recent months, however, expectations had shifted in favour of expecting the Fed to pause its tightening given concerns around the economy and inflation cooling steadily. In recent weeks, this view has shifted again with the Fed now expected to hike rates further while the economy continues to hold up. With this in mind, if tomorrow’s data comes in strong again, hawkish Fed expectations should drive USD higher. On the other hand, it would likely take a heavy miss at this point to truly dent these hawkish expectations meaning that the Dollar should stay well supported even if jobs are a little lower than last month.
Technical Views
USDJPY
The breakout in USDJPY has stalled for now around the upper part of the bull channel. However, while price holds above the 138.03 level and with momentum studies bullish, the focus is on a further move higher with 142.21 and the channel top the next hurdle for bulls.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.