Soft Payrolls Cool Fed Hike Bets as Yields Hold Near 2002 Highs

Stocks hold steady after a payrolls miss

US payrolls rose just 29,000 in September against forecasts near 90,000, and July and August were revised down by a combined 60,000. Unemployment held at 4.2% and annual wage growth slowed to 3.0%. Futures cut the odds of an October Fed hike to around 20%, from roughly two-thirds a week earlier.

On the 4h chart, the S&P 500 swept liquidity below the range at 7,616.79, then broke structure to the upside and closed Friday at 7,722.72, roughly flat on the week. A break above 7,782.20 opens the path toward 7,816.71. A return below 7,616.79 would undo the sweep and put 7,370.98 back in focus.

US 10-year yield stalls near 2002 highs

The 10-year yield touched 5.34% on October 1, its highest level since 2002, before the payrolls miss pulled it back into its range. Since late September it has moved sideways between 5.20% and 5.35%. A sideways yield is the friendlier setup for equities. A push above 5.35% would put renewed pressure on risk assets, including the S&P 500 setup above.

The 5.225% level is the floor to watch. A close below it opens the path toward 5.089%, the top of the gap left by the September 23 breakout.

Oil gives up 

WTI has dropped about 15% from its mid-September peak near $106. Early last week, an Axios report that Trump was ready to offer Iran sanctions relief knocked prices lower, and Trump denied it the following day. The payrolls miss added to growth worries. On Friday, Trump said the US would either “blow them up or make a deal” with Iran, yet WTI still closed the day lower.

WTI crude tested 88.72 again, the floor we flagged last week, and bounced to 91.25. As long as that floor holds, the liquidity resting above 95.46 and 96.78 is the next upside reference. A 4h close below 88.72 would open the path lower and cancel that setup.

BOJ Governor Ueda speaks (Tuesday)

Ueda speaks on Tuesday, October 6, in his first major remarks since the Bank of Japan raised its rate to 1.25% on September 18, the highest since 1995. Two board members dissented. Ueda did not rule out a larger 50 basis-point step but warned against tightening too abruptly, and the yen weakened toward 158 per dollar. Any hint at an October follow-up would support the yen.

On the 4h chart, USD/JPY broke the rising trendline from the September 13 low, then printed a bullish break of structure above 157.70 and trades at 157.82. If 158.456 breaks, the path opens toward 159.029 and then 160.392. A hawkish Ueda that drags the pair below 156.376 would invalidate the bullish setup.

FOMC meeting minutes (Wednesday)

The Fed releases minutes of its September 15-16 meeting on Wednesday at 18:00 GMT. That meeting delivered a unanimous 12-0 hike to 3.75%-4.00% under Chair Warsh, with the median projection pointing to one more hike by year-end. Payrolls have softened since then, so the minutes may read as stale. Markets will count how many officials saw further hikes as necessary. A hawkish account would lift yields and the dollar again.

Gold followed last week’s script: it broke below the head-and-shoulders neckline in the 4,223-4,240 zone, lost about 3% on the week and trades at 4,142.71. If 4,110.60 gives way, the August base at 4,018.79 comes into view. A renewed escalation with Iran that lifts energy prices and yields would add pressure. A recovery above 4,240 would neutralize the breakdown.

US jobless claims (Thursday)

Weekly jobless claims are not the same as last week’s payrolls report. Payrolls count jobs added over a month, while claims count new filings for unemployment benefits each week, the fastest read on layoffs. The last print came in at 197,000 for the week ended September 26, the lowest since July. A jump would confirm the payrolls weakness, while another sub-200,000 print would keep hike bets alive.

EUR/USD extended the decline we flagged last week, broke the 6-month low at 1.13251 and reached 1.12150. A corrective bounce toward 1.13251 is possible, but with US rates at 3.75%-4.00% and the Fed still leaning toward hikes, the rate gap favors the dollar. A rejection near 1.13251 would leave 1.12150 exposed again.

Canada unemployment rate (Friday)

Statistics Canada publishes September labour data on Friday at 12:30 GMT. In August, employment fell by 41,700 against expectations for a 15,000 gain, and the unemployment rate held at 6.4% only because participation dropped. Another weak print would add pressure on the Canadian dollar.

USD/CAD climbed from 1.3765 in early September to above 1.4250 with almost no pullbacks, leaving trend followers few chances to enter at better prices. The pair finally pulled back to 1.41998 and is now retesting the 1.42484 high. A breakout above it opens the path toward the 6-month high at 1.44154 and then 1.45215. A close below 1.41998 would mark the first real pause in the trend.

Bottom line

Soft payrolls cut Fed hike odds, but the 10-year yield still sits near its highest level since 2002 and remains the main pressure point for stocks and gold. Wednesday’s minutes and Thursday’s claims will show whether the hike debate is fading or only paused. Ueda on Tuesday and Canadian jobs on Friday set the tone for USD/JPY and USD/CAD, both trading near recent highs. Oil holds 88.72, with Iran headlines able to move it either way.

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