U.S. Dollar Makes New Yearly Highs After NFPs
NAGA | Sep 05, 2022 04:30AM ET
Investors continue to evaluate the price drivers formed last week. One of the main stories is the latest employment figures for the US and the US Dollar Index reaching new price highs during this morning’s Asian Session.
Asian markets continue to invest in the US Dollar due to the negative domino effect of the current Chinese Lockdowns and COVID-19 measures. The Chengdu lockdown was initially expected to last 4-5 days. However, the local authorities have advised the lockdown will be extended.
Regional experts advise the lockdown will most likely be expended again, similar to what markets saw with Shanghai. This can also influence the crude oil price and Asian stocks, such as the Nikkei 225.
The European gas crisis is also continuing to weigh on the Euro as member states rush to ensure they will have enough energy over the coming months. Meanwhile, Russia continues to send threatening signals regarding Europe's gas supplies.
The UK also is waiting for confirmation of the country’s new Prime Minister. Currently, Liz Truss is expected to be chosen by the conservative party, but markets await confirmation. This will likely affect the GBP and FTSE100.
h2 USD/JPY - Technical View/h2The USD/JPY is within its fourth consecutive week of growth. Over the past week, the asset's price has increased by above 2% and approximately 285 PIPs (Percentage in Point).
The price has mainly been driven by the safe haven status of the US Dollar, a hawkish monetary policy, and the negative economic impact of Chinese lockdowns on Japan.
Last week's Non-Farm Payrolls data was slightly higher than expected (315,000 vs. 298,000), the Unemployment Rate unexpectedly rose from 3.5% to 3.7%, and the Average Hourly Earnings were confirmed as 0.3%.
Overall the employment figures were more or less as expected. Investors were mainly looking to see if the employment figures allowed more leeway for the Fed to continue its hawkish stance over the coming months. The release did not indicate any major threat within the employment sector. Hence the more bullish movement in favor of the US Dollar.
Investors now turn their attention to the Federal Reserve speeches later this week and the next Consumer Price Index. Most investment banks and economists will release their forecasts throughout this week, which can influence the price.
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There are no major announcements scheduled for Japan throughout the day. Therefore, the price will likely be driven by the US Dollar and price factors. Japan's Finance Minister, Mr. Suzuki, advised that the government could take appropriate action as the national currency falls against the Dollar to a new 24-year low.
Experts believe this hints at the possibility of foreign exchange intervention to reduce market volatility, but this is not yet certain. He also confirmed that excessive and erratic movement of the currency could harm the economy and financial conditions within Japan.
h2 Crude Oil - Technical View/h2Crude oil continues to be influenced by opposing factors which is one of the reasons why the price has been experiencing both up and down trends since the end of July. This morning the price has increased by almost 1.80% but remains on the lower side of last week’s price range.
One of the reasons why the price is increasing this morning is the monthly OPEC meeting, which will take place throughout the day. The price influence will depend if the group comments on what has been said within the meeting. The main factor investors are looking for clarification on is the potential cut on the output that some members previously mentioned.
Investors fear that the cartel and its allies will consider the possibility of a new oil production cut, as Saudi Energy Minister Prince Abdulaziz bin Salman mentioned. In addition, the G7 countries agreed on Friday to impose further sanctions on Russian Commodities, such as price limits and insurance for ships carrying Russian commodities.
Of course, the Russian Energy minister has advised the Russian Federation will not supply oil to those states that use non-market pricing schemes.
So far, the price is also being pressured by the lower level of demand due to Chinese Lockdowns and poor economic performance within the UK, Eurozone, and especially in developing countries. Nonetheless, investors fear lower output may result in a lower supply level than the demand.
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