Market Update – October 4 – On the way to old normal

<p></p>
<p>Yesterday at 08:30 am ET (New York Time), <strong>JOLTS job openings for August again showed an incredibly buoyant labour market</strong> with 9.61m new available vacancies versus the 8.8m analysts were expecting. Even though the main target is inflation, this is not what the Fed wants to see and the voice saying <span>”higher for longer”</span> immediately resonated in traders’ minds. <strong>Bonds immediately sold off</strong> and the 10-year Treasury yield surged to its highest level since 2007, up 11 bps to 4.80%; Futures on 30y at the same time slid as much as 1.58% with the yield up to 4.924% and 30y mortgage rate approached. There are certainly <strong>deeper fundamental reasons</strong>, such as the continuing large <span>US deficit</span> at the same time that <span>China and Japan have stopped being net buyers</span> of US debt, with the former selling <strong><span>$40B</span></strong> a month since April and having already dumped <strong><span>$300B</span></strong> since 2021. However, it is not the current levels of rates that are abnormal, but rather those of the last 10 years. <strong>The current situation is actually back to the old normal</strong>.</p>
<h6><a href="https://forextraderhub.com/wp-content/uploads/2023/10/10y-us.jpg">10Y US Future<img decoding="async" class="alignnone size-full wp-image-735596 alignleft" src="https://forextraderhub.com/wp-content/uploads/2023/10/10y-us.jpg" alt="" srcset="/wp-content/uploads/2023/10/10y-us.jpg 1200w, /wp-content/uploads/2023/10/10y-us-300×156.jpg 300w, /wp-content/uploads/2023/10/10y-us-1024×533.jpg 1024w, /wp-content/uploads/2023/10/10y-us-768×400.jpg 768w, /wp-content/uploads/2023/10/10y-us-696×363.jpg 696w, /wp-content/uploads/2023/10/10y-us-1068×556.jpg 1068w, /wp-content/uploads/2023/10/10y-us-806×420.jpg 806w" /></a></h6>
<p>More than anything else, another thing caught the eye: after the data, USD immediately surged and broke 150 against the JPY, touching 150.16. And this is where the <strong>BOJ finally INTERVENED</strong> and caused the pair to fall <strong><span>290 pips (or nearly 2%)</span></strong> in less than 5 mins. That doesn’t seem to be enough and now the USDJPY is trading back at 149.22: the Japanese currency’s structural weakness is still great at the moment, although the 1-year overnight swap is over 1% and the 3m-10y curve has never been steeper. <span>The intervention has not been confirmed by the Ministry of Finance</span>, and there is some rumour that it may actually have been just a Request For Quote that made primary dealers remove all bids and then triggered stop losses in minor players accounts.</p>
<p>Obviously this is <strong>not a good environment for equities</strong> and yesterday US equities underperformed their European peers with the US100 down 1.83% and the <span>US30 ending in negative YTD territory</span> (a day after the Russell). <strong>The US500 is now testing its <span>200 MA</span></strong>. The <strong>VIX</strong> flew above <strong><span>20</span> </strong>and – some potentially good news – the inversion that can be seen between the spot and 3-month futures has indicated a market bottom in the past. But beware, history – when it repeats itself – almost never does so in exactly the same way.<a href="https://forextraderhub.com/wp-content/uploads/2023/10/VIX.jpg"><img decoding="async" class="alignnone size-full wp-image-735611" src="https://forextraderhub.com/wp-content/uploads/2023/10/VIX.jpg" alt="" srcset="/wp-content/uploads/2023/10/VIX.jpg 1200w, /wp-content/uploads/2023/10/VIX-300×156.jpg 300w, /wp-content/uploads/2023/10/VIX-1024×533.jpg 1024w, /wp-content/uploads/2023/10/VIX-768×400.jpg 768w, /wp-content/uploads/2023/10/VIX-696×363.jpg 696w, /wp-content/uploads/2023/10/VIX-1068×556.jpg 1068w, /wp-content/uploads/2023/10/VIX-806×420.jpg 806w" /></a></p>
<p>At least commodities breathed easy and silver rebounded after the previous day’s sell-off.</p>
<ul>
<li><strong>FX – USDIndex</strong> +0.18% @ <span>106.93</span>; <strong>USDJPY</strong> hedging up +0.08% at 149.17, <strong>Aussie</strong> at <span>2023 lows</span> (<strong><span>0.6307</span></strong>), <strong>Kiwi</strong> is today’s laggard, -0.44% at 0.5883.</li>
<li><strong>Stocks – US Futures negative again and heavy</strong>: <strong>US500</strong> -0.57% and t<span>esting its 200 MA</span>, <strong>US100</strong> -0.78%, <strong>US30</strong> -0.40% further <strong>into negative territory YTD</strong>. <strong>DAX</strong> future is testing <strong><span>15k</span></strong> right before the cash open. Yesterday AMZN <span>-3.66%</span>, TSLA <span>-2.02%</span>, NVDA <span>-2.82%</span>, MSFT <span>-2.61%</span>.</li>
<li><strong>Commodities – USOil</strong> resumes its decline <span>-0.76%</span> at $88.72, <strong>UKOil</strong> -0.67%.</li>
<li><strong>Metals – Gold</strong> -0.17% @ $1819.64, <strong>XAGUSD</strong> @ 21.03, <strong>Palladium</strong> <span>-1.21%</span> <span>below its ST floor.</span></li>
</ul>
<p><strong>Today</strong>: highlights include EZ, UK, US Services and Composite PMIs, EZ PPI, Retail Sales, US MBA, ADP, ISM, Durable Goods, OPEC+ JMMC, ECB’s Lagarde.</p>
<p><a href="https://forextraderhub.com/wp-content/uploads/2023/10/USJPY-post.jpg"><img decoding="async" class="alignnone size-full wp-image-735626" src="https://forextraderhub.com/wp-content/uploads/2023/10/USJPY-post.jpg" alt="" srcset="/wp-content/uploads/2023/10/USJPY-post.jpg 1200w, /wp-content/uploads/2023/10/USJPY-post-300×156.jpg 300w, /wp-content/uploads/2023/10/USJPY-post-1024×533.jpg 1024w, /wp-content/uploads/2023/10/USJPY-post-768×400.jpg 768w, /wp-content/uploads/2023/10/USJPY-post-696×363.jpg 696w, /wp-content/uploads/2023/10/USJPY-post-1068×556.jpg 1068w, /wp-content/uploads/2023/10/USJPY-post-806×420.jpg 806w" /></a></p>
<p><strong>Interesting Mover: USDJPY -0.03% @ 149</strong> after the shock of the intervention has recovered 2 handles and set 2 levels to be watched, <span><strong>150</strong> </span>and <span><strong>147.25</strong></span> approx, while the <span>trend is still clearly rising</span>.</p>
<p><strong>Click </strong><a href="https://www.hfm.com/en/trading-tools/economic-calendar.html"><strong>here</strong></a><strong> to access our Economic Calendar</strong></p>
<p><strong>Marco Turatti<br />
</strong></p>
<p><strong>Market Analyst</strong></p>
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