US Initial Jobless Claims Surge Due to Hurricanes
- Last week, US initial jobless claims surged, mainly due to the impact of Hurricane Helene on US Gulf states.
- The potential for Hurricane Milton to deliver a similar impact raises concerns about an ugly October US nonfarm payrolls report.
- With the Federal Reserve focusing on labor market data, weakness in the job market could lead to lower US yields and a softer US dollar.
- USD/JPY and gold prices continue to be influenced by movements in US interest rates.
Overview
The surge in initial jobless claims should alert traders to potential temporary softness in US labor market data, especially with extreme weather affecting the Gulf of Mexico during the reference week for the October report.
Given the Fed’s emphasis on the job market for rate decisions, weak data could result in a pullback in US bond yields and the dollar in the upcoming week.
This situation could have implications for USD/JPY and gold, which have been closely tied to US Treasury yields, particularly the short end of the curve.
Gold Price Analysis
Gold showed positive signs on Thursday, with a key reversal on the daily chart. While momentum indicators have yet to confirm this move, RSI (14) suggests a potential shift in directional risks.
If gold retraces and bounces from the $2625.80 level, a buying opportunity may arise with a stop-loss below for protection. Breaking above downtrend resistance at $2639 could lead to a push towards record highs at $2685.67.
If gold fails to break the downtrend, it may be wise to avoid the trade and seek better opportunities elsewhere.
Jobless Claims Surpass Expectations
US jobless claims hit a one-year high last week, exceeding all forecasts and impacting market sentiment. The unexpected surge offset the effects of elevated core US consumer price inflation figures for October.
Despite a 0.31% increase in core inflation, market expectations for Fed rate cuts rose slightly as traders focused on the jobless claims data. Longer-term inflation expectations also saw an uptick.
Impact on the US Dollar and USD/JPY
US interest rates continue to play a crucial role in currency pairs like USD/JPY and gold. With limited economic data next week, a further rise in US bond yields seems unlikely.
The possibility of another negative jobless claims report and its impact on October nonfarm payrolls could lead to a reversal in US yields and the dollar. This scenario points to downside risks for USD/JPY but upside potential for gold.
USD/JPY Technical Analysis
USD/JPY reversed near a key resistance level, indicating potential downside. While MACD and RSI remain bullish, a decline in short-dated yields could change this outlook.
Traders should wait for a clear break before establishing short positions with a stop-loss above the uptrend. On the other hand, a bounce from the uptrend could signal a buying opportunity with targets at recent highs.
Analysis
The recent surge in jobless claims and its impact on the labor market data, coupled with the unexpected rise in core inflation, have created uncertainty in the financial markets. This has led to expectations of potential rate cuts by the Federal Reserve and increased inflation projections.
Traders are closely monitoring US bond yields and the dollar, as they are influenced by upcoming economic reports and external factors like hurricanes. The implications for currency pairs like USD/JPY and commodities like gold are significant, with potential downside risks for the dollar and upside opportunities for gold prices.
Technical analysis of USD/JPY suggests a possible reversal, highlighting the importance of monitoring short-dated yields for market direction. Traders should be cautious and await confirmation before making trading decisions.