London 07/10/2022
US NFPs (Non-Farm Payrolls) were announced earlier today, a bit better than the markets expected (263K new job positions were created in September vs 250K that the markets expected). The immediate reaction of the markets was the strengthening of the US dollar because, as markets anticipate, the Fed has a good macroeconomic shape to move on with aggressive interest rate hikes to fight the high inflation which is the primary objective for the central banks.
In Europe, not many things have changed lately. The Ukrainian war, the energy crisis, and a possible upcoming recession remain the main issues.
Most of the stock indices had a bullish reaction this week; it is being reduced significantly after the NFPs. Also, most of the commodities are bullish this week but losing momentum after NFPs, except oil which remains bullish due to the production cut that OPEC decided on Wednesday. Finally, the bond yields jumped again and the US 10-year bond yield approached the price area of 4% again.
EURUSD (current price at 0.9757) started the week with an uptrend but during the last three days, it turned bearish. The last two days, it had a mild downturn but NFPs were the catalyst that caused the main decline. The USA continues to have a better macroeconomic picture than the countries of the Eurozone and the Fed seems more determined to hike the interest rates again compared to the ECB which has the headache of an upcoming recession that gives it limited room to do the same. There is no obvious technical support until the multi-year low price at 0.9530 that took place a few days ago.
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GBPUSD (current price at 1.1112) is mildly bearish this week, although it was performing better at the beginning of the week. The downgrade of the UK economy by Fitch and the good macroeconomic results of the USA eliminated the uptrend of the very first days of the week. There were no other economic announcements in the UK so all the markets’ anticipation has to do with the next steps of the central banks (Fed and Bank of England). Below 1.10, the heavy downtrend that the pair has developed in recent months may come back.
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USDJPY (current price at 145.15) is bullish this week and managed just to exceed the important resistance of 145. If it can stay above 145 then the multi-decade high at 145.90 could be threatened. The strengthening of the US dollar during the last 3 days and mostly today with the NFPs and the higher bond yields are the main reasons for that. The relatively low inflation in Japan, which was announced for September at 2.8%, allows the Bank of Japan to continue its loose monetary policy and negative interest rates. The trend is bullish but a multi-decade-high price (145.90) is not easy to break out.
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