FOREX Fundamental Analysis for November 6
All the week investors received multidirectional signals and only the release of the US labor market report on Friday allowed to understand what is going on. Only 150 thousand jobs were created in October, while the data from August and September were revised downward. Unemployment rose to 3.9% and average wage growth, on the other hand, slowed to 4.1% (y/y) and 0.2% (m/m). The labor market, one of the Fed's main arguments for continuing the monetary restriction cycle, is clearly cooling.
Last week's Treasury and Fed statements added to the uncertainty. Both do not particularly like the rally in US bond yields, as, firstly, it increases the risks of recession, and secondly, it increases the cost of debt servicing.
As a result, everything together led to the reduction of short positions on U.S. debt bonds, lowered their yields and undermined the dollar's position in forex trading, while at the same time raising the quotations of stock indices.
Recently, markets have been actively discussing the link between rising oil prices and a new round of inflation, citing the events of the 1970s as an example.
But last year's spike in inflation is more likely the result of a breakdown in supply chains caused by the COVID-19 pandemic. In 2023, supplies are getting better and prices are falling. The Fed takes this into account as it completes its rate hike cycle. The regulator will need time to determine the effectiveness of the measures already taken and continue them, if necessary.
The yields on Treasuries continue to decline, pushing EUR/USD up. Buy the pair, raising the targets to 1.088 and 1.094.