On Friday, the US jobs report raised many red flags and question marks, increasing the probability of a rate cut in June. Here are the most important factors of Friday’s report.

The revisions made to January’s jobs report were quite significant. The number of new jobs added was adjusted downward by more than 35%. In addition, the private sector’s new jobs added were revised downward by more than 45%, while manufacturing payrolls were revised down by more than 60%. Furthermore, the manufacturing industry lost around 4,000 jobs in February.

In February, the US economy added 275,000 jobs, exceeding the estimated 200,000. However, the unemployment rate unexpectedly rose to 3.9%, its highest in over two years.

There was no sign of inflationary pressure on wages. Average hourly earnings rose by only 0.1% MoM, while YoY slowed to 4.3% from 4.4%.

Fed Fund Futures

The jobs report released in February has increased the probability of a rate cut in June. Before the report, markets estimated an 85% chance of a 25-bp rate cut in June. However, after the report was released last Friday, the probability rose to just under 100%.

A lot of US data this week

This week, the primary economic events are from the US. We’re expecting inflation data and the 10-year bond auction on Tuesday, followed by the 30-year bond auction on Wednesday. Thursday brings the PPI (Producer Price Index) and Retail Sales data; Friday’s highlight is the University of Michigan Consumer Sentiment.

The most significant upcoming event this week is the release of US inflation data. Although recent related economic releases did not show any signs of inflation pressure or a change in inflation direction, it might not be a surprise if inflation continues to move in the right direction.

DXY at the lowest level since January

The US Dollar Index declined and broke multiple key support areas, including 103.30 and 103.0, reaching as low as 102.37. The weekly close confirms that the downside trend has resumed.

At this point, it is unlikely that there will be a significant increase in value, and any temporary increase is likely to be limited and short-lived. This is due to resistance levels currently standing at 103.65 and 104.0. On the other hand, if the value were to decrease, the next key support area would be at 102.0 and 101.90. This level will likely attract buyers who will try to prevent the value from going any lower.

USDJPY below 147.0

About a week ago, we shared a video on Instagram discussing the Bank of Japan’s (BoJ) upcoming policy decision. We pointed out that Japan is on the verge of making a landmark announcement. A few days later, Reuters reported that the Bank of Japan is expected to end its negative interest rate policy sometime this month.

USDJPY plummeted last week, dropping to 146.50 due to increasing expectations of a BoJ rate hike. As with historical trends, markets anticipate the BoJ’s decision in advance, making the announcement unsurprising.

The next support areas are at 146.10 and 145.56. Any upside move is likely to be short-lived below 148.50 or 148.80.

 

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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