US SEPTEMBER NFP: PATHWAY TO NOVEMBER RATE DECISION

• KEY NOTES FROM POWELL’S SPEECH LAST MONDAY
• TODAY’S READING AND POTENTIAL EFFECT
• POTENTIAL EFFECTS ON USDJPY

Later today Friday the 4th of October 2024 by 4:30pm GMT +4, the US Bureau of Labor statistics is due to post September Job report. This median forecast calls for payroll to increase by up to 147,000, while unemployment should remain at 4.2%. Markets are eagerly anticipating these data as it would give hints to participants as regards to FED November policy rate decision. As at the time of writing, market has priced in 63% for a 25bps and 37% for 50bps rate cut by 7th of November, this is according to FedWatch tool.

KEY NOTES FROM POWELL’S SPEECH LAST MONDAY

During the FED Chair speech on Monday, the 30th of September 2024 at the National Association for Business Economics annual meeting in Nashville, the chair maintained that the half percentage bumper cut doesn’t mean a preset course, but rather future action would be determined by economic data. On the overall, he reiterated that the economy is so strong and has made significance progress over the past two years and as such headed towards achieving its dual mandate goal of maximum employment and stable price. This speech comes about two weeks after the FOMC rate cut of 50bps on the 18th of September which happens to be the first since after four years. Meanwhile, markets anticipate further rate cut this year and in 2025 but this and more is a function of upcoming economic indicators.

          Speaking on the Labor market, Powell highlighted the strength of the labor market with the unemployment rate at a “natural state”, he also stated that labor force participation for prime age remains historical high. Despite a decrease in job openings, there are still more positions than job seekers. He acknowledged a slight cooling in the market due to slower job growth and increased labor supply. Powell emphasized that further cooling was not necessary to reach the 2% inflation target. Overall, the labor market remains solid, with positive indicators and a balanced outlook for the future, the Chair maintained.

TODAY’S READING AND POTENTIAL EFFECT
The September Job report is expected to show a healthy, yet modest labor market growth of 147,000. Similar to what was witnessed in August where the labor market saw a modest increase of 142,000. August data was an improvement from July's revised 89,000 which fell below the market's anticipated 160,000. Today’s reading is crucial for market participants as it would possibly give insight to both policy makers, traders and investors. 

On the part of the policy makers, it would likely serve as a guide with respect to the strength of the labor market, and as such help make informed decision at the next policy meeting. While most traders on the other hand look forward to the volatility that comes with the data release in the short term which is characterized by risk and rewards and investors look at long-term.

POTENTIAL EFFECT ON USDJPY

As markets brace up for the U.S September job reports, the environment has been somewhat slow, while waiting for this catalyst.
Looking at USDJPY, the pair has been bullish in the cause of the week, as it struggles to recover from September 16th low of 139.57 which took out December 28th low of 140.24. On the one-hour TF, the pair is up trending, respecting the channel, with the lower channel serving as support and upper channel being resistance. The price is currently support around the EMA 50, which act as confluence with the lower trendline. In view of the upcoming job report, if we see a strong reading, then analyst expects the surge to continue with potential target around 147.00 and if the resistance is broken, the next phycological barrier of 148.00 should be the next potential target as per technical analyst.
Conversely, if we see a week job report, then analyst expects USDJPY to break below the EMA 50 alongside the lower trendline and tank further with potential target around 145.00 and 144.00. Further breakout of these levels isn’t ruled out.

Fig. 1 USDJPY 1H, TradingView