Hot US employment market supports the USD

The USD got a boost on Friday as the US employment report for September was far better than expected, with the NFP figure coming in higher, the unemployment rate ticking down and the average earnings growth rate accelerating. The release showed a hot employment market, practically eliminated the market expectations for another double rate cut by the Fed until the end of the year. Across the world, JPY continued to weaken also as a result of growing expectations by the market that the BoJ is not to proceed with another rate hike, or at least finds political headwinds to such a move. Given the weakening of the Yen we may see BoJ once again intervening in the markets to JPY’s rescue. As per Reuters, Japan’s top currency diplomat Atsushi Mimura, on Monday issued a warning against speculative moves on the foreign exchange market.

 USD/JPY rallied on Friday aiming for the 149.40 (R1) resistance line. We see the case for further bullish movement given that the RSI indicator is above the reading of 50, yet has not surpassed the reading of 70, while on the flip side we note that the USD/JPY’s price action broke above the upper Bollinger Band, implying that the bulls should get some rest. Should the bulls maintain control over the pair, we may see it aiming if not breaking the 149.40 (R1) line aiming for the 152.00 (R2) level. Should the bears take over, we may see the pair breaking the 146.00 (R1) line, thus opening the gates for the 143.40 (R2) support base.

On a deeper fundamental level, we note the uncertainty dominating the markets about the situation in the Middle East. Please note that one year from the start of the conflict is completed today, hence we may see some missile attacks from the Palestinian side, while on the other hand, Israel’s retaliation attack against Iran is looming and could shake the markets.  

Other highlights for the day:

Today we get Germany’s industrial orders for August, UK’s Halifax House Prices for September, Eurozone’s Sentix index for October, Eurozone’s retail sales for August. On the monetary front, we note that ECB board member Cipollone, ECB chief economist Lane, ECB policymaker Escriva and Minneapolis Fed President Kashkari are scheduled to speak. During tomorrow’s Asian session, we get Japan’s all household spending and current account balance, both being for August and Australia’s NAB Business conditions and confidence for September. We also note that Atlanta Fed President Bostic, St. Louis Fed President Musalem and RBA Deputy Governor Hauser speak and RBA is to release the minutes for the September meeting. 

AUD/USD continued falling on Friday breaking the 0.6825 (R1) support line, now turned to resistance. We tend to maintain a bearish outlook for the pair yet the RSI indicator below our chart refuses to break below the reading of 50, implying that some stabilisation is also possible. Should the buyers take charge of the pair’s direction, we may see AUD/USD breaching the 0.6825 (R1) line and aiming for the 0.6940 (R2) level. On the flip side, should the selling interest be extended, we may see AUD/USD aiming if not breaking the 0.6715 (S1) support line, with the next possible target for the bears being set at the 0.6575 (S2) support level.    

As for the rest of the week:

On Tuesday we get Germany’s industrial output for August and Canada’s trade data for the same month. On Wednesday we get Australia’s Consumer confidence for October, and on Wednesday we note on a monetary level RBNZ’s interest rate decision and we get Norway’s and the Czech Republic’s and most importantly the US CPI rates, all for September as well as the weekly US initial jobless claims figure. On Friday we get Germany’s final HICP rates for September, UK’s GDP and manufacturing output rates for August, the US PPI rates for September and Canada’s number of building permits for August and employment data for September as well as the preliminary US UoM consumer sentiment for October.  

USD/JPY Cash Daily Chart

• Support: 146.00 (S1), 143.40 (S2), 140.30 (S3)
• Resistance: 149.40 (R1), 152.00 (R2), 155.20 (R3)

AUD/USD Daily Chart

• Support: 0.6715 (S1), 0.6575 (S2), 0.6475 (S3)
• Resistance: 0.6825 (R1), 0.6940 (R2), 0.7060 (R3)

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