Yesterday we got a taste of what could happen if US jobs data continues to disappoint in the coming sessions. The JOLTS job offers were enough to trigger more dollar selling and push yields lower. And we now see USD/JPY and 10-year Treasury yields near a critical point on the charts.
USD/JPY Daily Chart
Daily Chart of 10-Year US Treasury Yields (%)
Since July, the two charts have moved quite similarly, further strengthening their correlation. We saw USD/JPY and 10-year yields hit notable lows in early August before rebounding slightly. There was another decline in late August, but things started to move the other way again last week.
This week, however, we return to the same key technical picture on both charts. For USD/JPY, there is a threat of a stronger break towards 140.00 next week. As for 10-year yields, they could threaten a more critical break below 3.70%.
This comes as traders are increasingly concerned that the Fed will cut rates by 50bps this month. The probability of such a cut is now around 45%. As a reminder, this probability was pushed back to around 26% in mid-August, when markets calmed down after the drama of the end of the carry trade.
The focus now is on the U.S. labor market. And that’s no more important information than tomorrow’s employment report. But for today’s trading, we also have to consider the ADP employment change. It’s a data set that I would say is more of a roulette table these days, but we still can’t ignore the potential impact of the market and the reaction to it. That’s especially true in a sensitive period like this.
cnbctv18-forexlive
