Strong Job Growth Boosts U.S. Dollar, but Mixed Economic Indicators Keep Markets Cautious

The US Dollar saw an uptick following the Payrolls report, which unexpectedly exceeded the forecast in terms of job growth. The DXY dollar index rose above 106.50, once again targeting the bullish support level of 107:The US economy added 336,000 jobs in September, while the consensus forecast had anticipated 160,000. However, other indicators, such as wage growth and the unemployment rate, were less optimistic. Unemployment increased from 3.7% to 3.8%, and wage growth was up by 0.2%, although 0.3% had been expected. Job growth was in line with preliminary labor market data for September, including JOLTS data (a sharp increase to 9.6 million openings after several months of decline) and declining initial unemployment claims, which have been approaching the lows of the current business cycle, coming close to 200,000 in the last week:The report led to a sharp repricing of the outlook for the Fed tightening, as markets priced in both a higher likelihood of a rate hike in November and the possibility that rates would remain elevated for an extended period. This can be seen from the upside response in the yields of both short- and long-term bonds. The yield on the two-year bond increased by 9 basis points, and the yield on the ten-year bond (which is particularly sensitive to expectations of high rates' duration) rose by 12 basis points:The U.S. market opened lower, with the S&P 500 approaching the local minimum of 4215 points and seemingly bracing to test the 4200 handle, as there are little catalysts in sight for a U-turn. Technically speaking, the market recently broke through the primary uptrend channel, with a test of the important 200-day moving average ahead. Given the cyclicality of the market, a repetition of the scenario from March 2023 is likely, when the price broke the 200-day SMA, declined by approximately 100 points, and only then attracted a sufficient number of buyers: