An electrifying week is coming up, featuring another crucial US inflation report and minutes of the latest Fed meeting. Both will be key pieces of the puzzle for the dollar and risk assets, as traders grapple with whether the Fed will pause its tightening cycle anytime soon. Even in case of a softer inflation print though, this type of speculation seems premature. 

The USDJPY pair was attacking the critical resistance zone between 145 and 146, where the Bank of Japan intervened several days ago. As of writing, the USD traded somewhat higher on the day, boosted by today's US labor market data. US jobs market remains solid The headline non-farm payrolls came in at 262,000, which was below the unrevised August reading of 315,000 and just over the consensus forecast of 255,000. Notably, the September print was the lowest since April 2021, albeit not terrible. The revision to the change in total nonfarm payroll employment for July increased it by 11,000, from +526,000 to +537,000, and the change for August stayed at +315,000. Average hourly wages increased by 5.0% from a year ago and by 0.3% from August, exceeding estimates by a narrow margin. The former number was also unchanged from the 0.3% increase in August, while the latter dropped from a 5.2% Y/Y increase one month ago. The unemployment rate surprisingly decreased from 3.7% to 3.5%, significantly below the predicted unchanged reading. This was due to a 250,000 decrease in the number of jobless people, who fell from slightly over 6 million to 5.753 million. Cautious trading It looks like the 145 resistance could be broken today, as the USD is being supported by the broad greenback strength and rising US yields. If that happens, we might see a quick leg higher to 146, and if the BoJ does not intervene again, a further rally toward 150 could occur over the next few days. Alternatively, if sentiment deteriorates and bulls will lack the courage to test the BoJ's willingness to intervene, we might see some profit-taking, likely dragging the pair back to 144.

Summary Nonfarm payrolls nearly matched consensus expectations with a 263K gain in September. Job gains were largest in some of the hardest-hit pandemic sectors, such as leisure and hospitality and healthcare. The unemployment rate returned to a 50-year low of 3.5% through a combination of solid job growth and a roughly flat labor force. Wage growth moderated slightly but remains well above rates that are consistent with the Fed's 2% inflation target. Taken together, today's employment report suggests the labor market remained exceptionally tight headed into the final quarter of 2022. There are signs in the data that labor supply and demand are directionally moving toward balance, but gradual improvement should not be mistaken for a completed journey. We continue to look for the FOMC to hike its policy rate by 75 bps at its November meeting, and we await the September CPI report on Thursday for a fuller picture of how the Fed's rate path is likely to proceed through year-end and into 2023. Download The Full Economic Indicator

S&P500 on the four-hour chart is trading muted on Friday, ahead of the widely expected US non-farm payrolls report, which is due later in the session. After falling into the lower half of the Bollinger bands, the index is hanging on the 50-EMA support level, which is in confluence with the last bottom at 3721.6. The recent rally has proved to be short-lived as the bullish bias is losing steam with the price retreating from the 3806.8 resistance region. Though, the next direction of the price depends on the 3721.6 crucial level. Since Bollinger bands exhibit a fading bullish bias, and the bands have been narrowing regarding price consolidation, an emerging M pattern may rule out the market. Thursday’s top, which is totally within the bands is considered a relatively lower top compared to Tuesday’s top, which closed out of the bands. Hence, 3721.6 is the M-pattern neckline, and penetration of this level will confirm the pattern, accelerating bearish sentiment. If that happens, the immediate target for sellers can be estimated at around 3698.4. A sustained move below this hurdle can take the pair down to 3668.9, 161.8% of the last upswing. Further declines will put 3636.4 and 3583.7 in the spotlight. Otherwise, should the 3721.6 level hold, buyers will bounce back toward the 3806.8 mark from the 50-EMA support area. A sustained break of this barrier will pave the way to resuming the rally towards the 200-EMA around the 3856.1 mark. Short-term momentum oscillators imply that bullish sentiment is fading. RSI has dropped to 50 from the overbought level. Momentum, which has seemingly peaked around one-month highs in buying region, is pointing down. Positive MACD bars are shrinking below the signal line.

Let me not mince words. I’m disgusted by the fact that the Republican party nominated Herschel Walker for a seat in the US senate – and that he actually has a chance of winning. I’m disgusted, but I understand it. It’s simply a cynical tactic. Walker’s limitations are so apparent that even members of his own party have publicly acknowledged his shortcomings. They’ll support him anyway and whitewash his deficiencies, however, in an effort to shift control of the Senate to Republican hands. His supporters in Georgia are willing to entrust their representation to an incompetent senator who hardly presents as a moral exemplar solely because they expect him to toe the line and vote with the Republican leadership. Concerns about competency and character simply take a back seat. Actually, that’s an overstatement. Concerns about competency and character are nowhere to be found. Of all the people that Republicans could have chosen in the state of Georgia, what does it say about Republicans that they picked Herschel Walker? It seems reasonable to view putting Walker up for this post as being indicative of the quality of decisions that we can expect from this party; and, unfortunately, this nomination is not unique. It’s just a single representation of what’s happening much more broadly. Across the country, the Republican party is putting up unqualified candidates for public office. For me, the litmus test is easy: Anyone who continues to support the big lie and who acknowledges a willingness to subvert future election results is unfit to hold office – at any level. Herschel Walker is just one of many. Simply focusing on the new crop of election deniers seeking public office in the coming mid-term elections, often in roles with direct authority over election processing, isn’t sufficient. While I view these candidates as being unfit for office, that assessment also applies to the 147 Republican Congressmen – eight Senators and 139 House members – who voted to overturn the 2020 election, the vast majority of whom are up for reelection. Their votes to reject duly authorized electors in the election process should, by itself, disqualify them from any position of public trust. According to US Code chapter 115, “Whoever, owing allegiance to the United States, levies war against them or adheres to their enemies, giving them aid and comfort within the United States or elsewhere, is guilty of treason and shall suffer death, or shall be imprisoned not less than five years and fined under this title but not less than $10,000; and shall be incapable of holding any office under the United States.” I’m no lawyer but it’s hard to see why this section of the code wouldn’t be pertinent to the actions by these 147 legislators on January 6, when those votes were taken. Even if the Justice Department fails to seek sanctions in connection with Congressional representatives who sought to override the will of the people, voters shouldn’t follow suit. I’m appalled by how so many of my countrymen are willing to give a pass to these betrayers of our democratic traditions. Most Republicans appear to believe that it’s worth subverting our long cherished democratic principles and practices to avoid Democratic control; and this perspective seems to be at work both at the state and Federal levels. Whatever the sins of the Democrats, however – and I’ll concede that there may be no shortage – those sins don’t compare to the threat to our democracy caused by the Republicans’ failure to abide by election results. I have little doubt about how history will ultimately look upon the current crop of election deniers; but I’m tired of waiting for that verdict to be handed down. In the most charitable light, those who’ve been duped into believing the big lie despite all the evidence to the contrary may end up being remembered as being naïve and misguided; but those who perpetrated that lie, all the while knowing it to be untrue, will be remembered for sabotaging our democratic norms and traditions; and they will certainly be judged less kindly. These people are still prioritizing their quest for personal power ahead of the public interest of preserving our constitutional democracy. They have no business serving in public office, and the mid-term election isn’t too soon to send that message. To safeguard against having a repeat of the January 6 assault on our Capitol, these election deniers need to be sent packing.

Equities have dropped for a second day, as a healthy set of US job numbers dashes hopes of tempering in the Fed’s hawkishness. Stocks drop back following non-farm payrolls “Those hoping for a Fed pivot have been sorely disappointed with today’s job numbers, which have confirmed that US economy continues to rumble along quite well. The latest bear market bounce has now begun to wilt as investors wearily return to expectations of at least 125bps of tightening by the end of the year, with more to come in 2023. Once more we are back to buying the dollar and selling stocks, in a continuation of the themes that have been so strong throughout the year. Even the impending commencement of earnings season offers little hope, given how weak performance here has been.” Natural gas holds steady after shaky couple of days “The spectre of a cold winter looms large over Europe, and while gas prices haven’t risen much over the past two days, and may struggle now that the dollar is rising again, they still pose a severe threat to the European economy. Demand is sure to pick up into year-end, suggesting that another rally in gas prices is just around the corner.”