Forex News

• USD/JPY declines to near 157.60 as the US Dollar Index corrects to near 101.88.
• Investors shift their focus to the US NFP data for September.
• Tokyo inflation data ex. Fresh Food, Energy accelerates to 3% YoY in September.

The Japanese Yen (JPY) trades higher against the US Dollar (USD) ahead of the United States (US) Nonfarm Payrolls (NFP) data for September, which will be published at 12:30 GMT.

In the European trade, the USD/JPY pair is down 0.3% to near 157.60 due to weakness in the US Dollar.  The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.15% lower to near 101.88. The DXY corrects from its yearly high of 102.20 posted on Thursday.

Analysts at OCBC wrote in a note that Bloomberg consensus expects "nonfarm payrolls to rise by 90,000 in September, down from 162,000 in August, while the unemployment rate is forecast to remain unchanged at 4.1%."

OCBC points out that "recent jobless claims data have continued to trend lower, suggesting labour market conditions remain firm." In their view, "the risk of an upside payrolls surprise appears to be increasing," and a "stronger-than-expected employment report would likely reinforce expectations of further Fed tightening, provide additional support for the USD."

On the Yen front, Tokyo’s Consumer Price Index (CPI) data for September remained stronger-than-projected. Tokyo CPI ex. Fresh Food jumps to 2.7% Year-on-Year (YoY) from 1.8% in August. The inflation data was seen at 2.4%. Tokyo CPI ex. Food, Energy accelerates at a significant pace to 3% YoY from the previous reading of 2%.

USD/JPY Technical Analysis

In the daily chart, USD/JPY trades at 157.61. The pair holds a mildly bullish near-term bias as spot trades above the 20-period exponential moving average (EMA) at 157.26, suggesting underlying demand on dips after the recent recovery from the mid-153s.

The Relative Strength Index (14) at 51.50 sits just above its neutral line, hinting at a steady, non-overextended upswing rather than aggressive trending conditions.

On the downside, immediate support is located at the 20-day EMA at 157.26, followed by the September 30 low at 156.38. On the upside, the September 24 high at 159.04 is the immediate resistance. Above 159.04, the September 2 high at 160.39 will be the key hurdle.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• Gold remains confined in a range as traders opt to wait for the release of the US NFP report.
• The USD stands firm near a one-and-a-half-year top, acting as a headwind for the commodity.
• Oil-driven inflation fears keep US bond yields near multi-year highs, further capping the bullion.

Gold (XAU/USD) steadies below the $4,200 mark during the first half of the European session on Friday as traders keenly await the release of US employment details. The US Nonfarm Payrolls (NFP) report is expected to show the economy added only 90K jobs in September, down from the previous month's reading of 162K. Meanwhile, the Unemployment Rate is anticipated to hold at 4.1%. Adding to this, annual wage inflation, as measured by the change in Average Hourly Earnings, will offer fresh cues about the Federal Reserve's (Fed) future policy path amid receding October rate-hike bets. This, in turn, will drive the US Dollar (USD) and provide some meaningful impetus to the non-yielding bullion.

A slew of influential FOMC members recently indicated that they do not see an urgent need for an immediate interest rate hike after the widely expected quarter-point increase at the September meeting. Meanwhile, the Institute for Supply Management (ISM) reported on Thursday that economic activity in the US manufacturing sector expanded for the ninth straight month in September. Additional details of the survey revealed that raw material prices increased for a 24th consecutive month. This comes on top of inflationary concerns stemming from volatile energy prices, which underpin prospects for additional Fed tightening and help limit the overnight pullback in US bond yields from multi-year highs. Apart from this, the US-Iran standoff continues to support the USD and acts as a headwind for the commodity.

The Wall Street Journal reported that the Pentagon may soon send a third aircraft carrier strike group and 10,000 sailors and Marines to the Persian Gulf. Separately, Iran’s Persian Gulf Strait Authority (PGSA) said several tankers were attacked in the Strait of Hormuz in recent days. Adding to this, US President Donald Trump said on Wednesday that he would decide very soon whether to blow up Iran and added that the war will end very soon one way or the other. This keeps the geopolitical risk premium firmly in play and favors USD bulls, warranting some caution for XAU/USD bulls. Hence, it will be prudent to wait for strong follow-through buying before confirming that the Gold price has formed a near-term bottom around the $4,100 mark and positioning for any meaningful appreciation move.

XAU/USD 4-hour chart

Technical Analysis

The XAU/USD pair keeps a bearish near-term tone below the 200-period Simple Moving Average (SMA) on the 4-hour chart and the mid-range Fibonacci retracements. However, the Moving Average Convergence Divergence (MACD) indicator remains in positive territory with the line above its signal and a still-constructive histogram. Meanwhile, the Relative Strength Index (RSI) around 43 hints at a potential pause in the downside rather than a clear bullish reversal.

Hence, any positive move beyond the $4,200 mark is more likely to confront immediate resistance near the 61.8% retracement at $4,230. The 50% level at $4,319 forms the next nearby topside barrier ahead of the 200-period SMA at $4,386 and the 38.2% retracement at $4,408. This reinforces a dense supply zone, with the 23.6% retracement at $4,519 marking a more distant cap that would need to be reclaimed to meaningfully challenge the current bearish bias. On the downside, initial support is seen at the 78.6% Fibo. retracement at $4,103, ahead of the prior swing low near $3,942.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Deutsche Bank’s Early Morning Reid team reports that the S&P 500 broke a three-day losing streak, helped by a pullback in US Treasury yields and more dovish FOMC commentary. Despite strong US data and earlier upward pressure on yields, markets now price a much lower probability of an October Fed hike, supporting US equities into the upcoming jobs report.

Equities supported by lower hike odds

"Whilst European assets struggled yesterday, there was a very different tone in the US."

"Moreover, US equities recovered from their earlier sell-off, with the S&P 500 (+0.19%) ending a run of three consecutive declines, whilst futures for the index are up another +0.27% this morning."

"That left an October Fed hike just 30% priced by yesterday’s close, down from 37% on Wednesday and 70% on Monday before NY Fed President Williams similarly signalled no urgency for the next hike."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• GBP/USD edges up above 1.3200 on Friday but remains close to four-month lows, at 1.3180.
• Risk aversion amid the global bonds' selloff has boosted the US Dollñar across the board this week.
• Investors are looking from the sidelines on Friday, awaiting the release of the US Nonfarm Payrolls report.

The British Pound (GBP) shows marginal gains against the US Dollar (USD) on Friday, with the GBP/USD pair trading just above 1.3200, yet unable to take any significant distance from the four-week lows at 1.3180 hit on Thursday. The Pound is heading for its fifth consecutive weekly decline, with the safe-haven US Dollar buoyed amid a rout in global bonds, and with investors focused on the US Nonfarm Payrolls report, due later on the day.

US economy is expected to have created 90,000 new jobs in September, according to the market consensus, while the Unemployment Rate is seen steady at 4.1%. The ADP Employment Change report beat expectations on Wednesday and boosted hopes for a strong payrolls reading on Friday, although recent inflation data has cooled expectations of a Federal Reserve (Fed) interest rate hike in October.

Fed officials have contributed to cooling hopes of back-to-back rate hikes, although they have made it clear that monetary policy will be tightened further in the coming months. Dallas Fed President Lorie Logan said earlier on Friday that the bank will need to hike rates by at least 50 basis points to get inflation back on track, while Minneapolis Fed President Neel Kashkari reiterated his projections of one more rate hike before the year-end.

US Dollar remains firm as bond selloff deepens

The US Dollar, on the other hand, has been drawing support from the global bond rout, which has crushed investors' appetite for risk this week.

Strategists at Brown Brothers Harriman argue that the “upward trend in longer-term bond yields” largely reflects “a tighter expected policy path and rising real term premia – the compensation that investors require to hold longer-term bonds – with long-run inflation expectations still well anchored.”

Against this background, and with investors spooked away from the Euro amid the escalating French borrowing costs, the sharp EUR/USD decline has boosted the Greenback against its main peers.

In the UK, the calendar is void on Friday but, on Thursday, the S&P Global Manufacturing Purchasing Managers' Index (PMI) was revised lower, with output showing the weakest growth in the last six months. This partially offset the positive impact of Bank of England policymakers, including Governor Bailey, hinting at higher interest rates ahead, and put additional pressure on the Pound.

ING’s Chris Turner notes that the French debt sell-off triggered a reassessment of global rate expectations, but US short-dated yields only corrected modestly. With US labour data still solid and energy prices high, ING sees the Dollar retaining or slightly extending gains, with DXY targeting the 102.85.

Fed path keeps Dollar supported

"Perhaps adding to the correction lower in US rates were comments from Fed Vice Chair Philip Jefferson echoing remarks from John Williams earlier in the week that the Fed should not rush into back-to-back rate hikes. Pricing for a Fed hike in October has now dropped to just 28% from 70% a week ago, and it looks like the market is going to settle into the view that the next hike comes in December."

"Feeding into the Fed story will be today's release of the September non-farm payroll figure. Consensus expects around an +85/90k headline gain, an unemployment rate remaining low at 4.1% and a healthy average earnings figure near 3.1% year-on-year. Given very low growth in the US labour force, we doubt a downside disappointment in the headline number will weigh heavily on US rates or the dollar."

"With energy prices remaining at their highs and the US activity story resilient, it looks like the dollar can largely hold gains if not extend a little higher – especially against the euro. DXY broke to a new high for the year above 101.80 yesterday and looks biased to head up to the 102.85 area."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)