The US dollar has pulled back across the majors as US non-farm payrolls fell more than expected in August by 84,000, marking the eighth consecutive month of contraction in US job growth. Perhaps even worse than that, the unemployment rate surprisingly rocketed to a nearly 5-year high of 6.1 percent from 5.7 percent.
Carry trade has a successful track record that goes back more than 25 years. However, a massive shift in today's complex financial markets towards risk aversion is not only questioning the logic of this type of absolute return strategies but also threatening the survival of many carry traders.
The dollar continues to gain but the USDJPY break below a supporting trendline suggests a bigger bear move for the pair.
Currency Pair: GBP/JPY Short-Term Bias: Short Chart: 15 Min Charts
The GBP/JPY has come under heavy selling pressure during the past few hours of trading, triggering an oversold RSI signal in the process.
The market's top market moving economic indicator (the non-farm payrolls release) is due Friday; and the release couldn't have come at a more critical time for the US dollar. After a significant rally against nearly everyone of its major counterparts the currency may finally be losing steam. Will an eighth consecutive contraction in employment break the dollar's rally? Where are the best oppurtunities to play this event risk? Read on to find out.
Currency Strategist
With the usual return of liquidity and volatility after the US Labor Day holiday, speculation over the timing and severity of the Federal Reserve’s next monetary policy shift has moved back into the forefront. However, the market’s outlook for rate hikes certainly isn’t supporting a strong dollar in the near-term.