Well, we got an early taste of things yesterday if US jobs data continues to disappoint in the sessions ahead. The JOLTS job openings here was enough to trigger more selling in the dollar and send yields tumbling. And we’re now seeing both USD/JPY and 10-year Treasury yields near a critical juncture on the charts.
USD/JPY daily chart
US Treasury 10-year yields (%) daily chart
The movement since July has been rather similar for both charts, further cementing their correlation. And we saw USD/JPY and 10-year yields both hit notable lows in early August before a minor bounce. There was another dip in late August but things moved back the other way last week.
However, this week we’re returning to the same key technical juncture on both charts. For USD/JPY, there is a threat of a stronger breakdown towards 140.00 next. As for 10-year yields, it might threaten a more critical break under 3.70%.
This comes as traders are growing more anxious in wanting the Fed to cut by 50 bps this month. The odds of that are now at ~45%. For some context, it got pushed back to ~26% in mid-August as markets settled down after the whole carry trade unwind drama.
The focus of attention now is on the US labour market. And it doesn’t come any bigger than the jobs report tomorrow. But for trading today, there’s also the ADP employment change to work through. It’s a data set that I would say is more akin to a roulette table these days but you still cannot discount the potential market impact and reaction to it. That especially in a sensitive time like this.