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USD/JPY hits a 10-month high ahead of NFP data

USD/JPY has risen to a 10-month high, supported by dollar strength after the Fed minutes made a US December rate cut at last likely.

The minutes to the September Federal Reserve meeting had a hawkish bias as many participants had already ruled out a December rate cut. Expectations for a December cut fell below 30% after being priced in at near certainty a month ago.

Attention is now turning to the September nonfarm payroll report, which was delayed by the US government shutdown. Expectations are for 50,000 jobs to be added, and 22,000 jobs were added in August. The unemployment rate is expected to remain unchanged at 4.3%, whilst earnings growth is forecast at 0.3%.

Given that October nonfarm payrolls won't be released, this is the final NFP report ahead of the Fed's December rate decision and comes as policymakers are divided over whether sticky inflation or a weak labour market is more critical for the US economy. Stronger-than-expected data could lift the US dollar.

Meanwhile, the yen is finding some stability in the European session after falling around 6% since Prime Minister Takaishi was elected leader of the ruling party last month.

Worries over enormous fiscal spending and a low-interest-rate environment are fueling a sell-Japan trade. The BoJ is no longer expected to hike rates in December.

The yen has weakened towards levels where Japanese authorities may intervene, particularly if there are any sudden moves. There have now been several verbal warnings.
 

USD/JPY forecast – technical analysis

USD/JPY broke out of its rising channel, pushing to a 10-month high of 157.70. The RSI is overbought, so there could be a period of consolidation or a pullback before further gains.

Buyers will look to target 158.90, the 2025 high, and 160.00 beyond that.

Support can be seen at 156.70, the late January high, and below here, 155, the upper band of the rising channel. Should buyers break below here, 153 is the next level of support, followed by the October 10 high and November 6 low.

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FTSE 100 rises as Nvidia earnings calm AI jitters

The FTSE 100 is rising, snapping a 5-day losing streak, boosted by solid market sentiment following the Nvidia earnings, even though the UK index is short on tech stocks.

Nvidia beat expectations, posting Q3 revenue of $57 billion, EPS of $1.30, and Q4 revenue forecasts of $65 billion.

The firm has become a bellwether for the broader frenzy surrounding AI, notably because other companies rely on NVIDIA chips. The AI trade has taken a hit in recent weeks as investors questioned the valuations of tech and chip stocks.

These figures, combined with comments from CEO Jensen Huang, helped calm AI bubble fears, boosting sentiment across the globe and lifting indices, including the FTSE.

Sticking with earnings, Helma is up almost 10% after raising its annual revenue growth forecast and posting a 29.3% increase in half-year adjusted pretax profit. This comes thanks to strong US demand for its photonics products for data centre construction.

UK calendar is quiet today. Yesterday, UK inflation cooled for the first time in five months, or 3.6% year on year, down from 3.8%. The data paves the way for the Bank of England to cut interest rates by a further 25 basis points in next month's meeting.

Tomorrow, attention will be on the UK PMI data. However, the primary focus will now turn to the budget next week, while the chancellor is expected to announce fiscal tightening to fill a black hole.
 

FTSE forecast - technical analysis

After hitting a record high of 9915, the FTSE fell sharply, dropping to a low of 9500, the 50 SMA, and the lower band of the rising channel. The price remains in the rising channel, so the long-term uptrend remains intact.

Buyers will look to rise above 9580, the October 9 high, to bring 9700, the midpoint of the channel, into focus. Above here, 9800 and 9900 are the levels to watch for, ahead of the fresh record highs.

Sellers would need to close below 9500 to break out of the channel and bring 9350, the August high, into play.
 

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