Crucial change of the interest rate outlook in US following Oct Jobs Report

[walid]

• The Greenback is still able to hold most of what it gained last Friday versus its rival currencies, as the expectations of having the first Fed's interest rate hiking decision since 2006 by the end of this year rose significantly, after the release of US labor report of last October.
• The report has shown gaining of 271k of jobs out of the farming sector which is the biggest adding since last May, while the median forecast was referring to adding only 180k, after gaining 142k in September has been revised to 137k
• The unemployment rate has fallen also to 5% last October which is the lowest level since February 2008, while the market was waiting for no change to be at 5.1% as it has been last September.
• The yearly average earning per hour figure rose by 2.5% in October to be the highest reached rate of rising since October 2009 with monthly rising by 0.4%, while the consensus was pointing to rising by 0.2%, after no monthly change in September showing also accelerating of the wages inflationary pressure.
• The Fed's vice president Stanley Fisher has referred previously to wages inflation building up with the labor market improving and that's what we have seen by the end of last week.
• After last October FOMC meeting, The Fed has already supported the odds of having the first interest rate hiking by the end of this year by showing higher consideration of raising the fund rate next December by saying that it will see next meeting "whether it will be appropriate to raise the target range or not" , after keeping it unchanged between 0 and 0.25% since Dec. 16 2008.
• The Fed has chosen also to cool the worries about the US economy because of the global economic slowdown saying merely following last meeting that it will monitor the global developments, while the economy is running by a moderate pace amid balanced risks.
• It has been considered direction to downplay the global economic slowdown risk, as it said in September that the global developments may restrain the growth of the US economy.
• The Fed had repeated again its appreciation of the housing market improving but it had seen jobs growth slack to be the most dovish point of that meeting economic assessment.
• So now, after the release of this upbeating report, the situation is looking different with the current higher interest rate outlook in US which drove the US Treasuries yields up lowering their prices.
• While the US equities were in mixed situation, After this report which has given optimistic view about the US economy but with higher interest rate outlook suggesting higher probability of watching Fed's lift-off next FOMC meeting on Dec. 15-16.
• This waiting tightening action can support the greenback further versus the Chinese Yuan, Russian rubble, Turkish lira
• Hiking the Fed Fund rate for the first after keeping it between 0.25% to zero since December 2008 can also dampen the commodities and energy prices which are actually depressed.
• While the decision of hiking the interest rate in US itself can generally cause problems to the other central banks by driving up the cost of borrowing up.
• Last Friday, We have not watched yield rising in the secondary money market of US but also in Europe which is looking waiting for an easing action by the ECB for propping the inflation up and stimulating the growth in EU.
• We have seen today also rising extension of USDJPY to be now trading close to 123.50, after reaching 123.61 following last Friday breaking out of its upper barrier of trading between 118.07 and 121.65.
• God willing in the case of rising higher, the pair can face 125 psychological level before facing resistance at 125.26 which can be followed by 125.86 whereas the pair has formed previously a peak on last Jun. 5.
• While the way down can be met by supporting level at 120.04, before facing the same barrier lower band at 118.07.
• USDJPY is now in its thirteenth day of being above its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today 120.24.
• After ending the side way of trading between 118.07 and 121.65, the pair is now above its hourly 20-SMA, its hourly 50-SMA, its hourly 100-SMA and also its hourly 200-SMA.
• Over the daily chart, the pair is now also above its 20-SMA, its 50-SMA, its 100-SMA and its 200-SMA.
• After extending its rising today too reaching 123.61 until now, The pair is having now its daily RSI-14 just above the neutral area into the overbought area above 70 reading 71.850
• USDJPY daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is having also its main line now in the overbought area above 80 reading 93.088 and also its signal line which is reading now 89.295 showing probability of watching correction over the short term for fixing this overbought stance.


Have a good day

Kind Regards
FX Market Strategist
Walid Salah El Din
Mob: +20 12 2465 9143
E-Mail: mail@fx-recommends.com
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