- The US dollar has pulled back from the 50 Day EMA against the Japanese yen in trading on Thursday as we wait for the Non-Farm Payroll numbers.
- This announcement could be a major moment of clarity for the market, because quite frankly most people are betting as to whether or not central banks will continue to tighten monetary policy.
- What I find most astounding is that you actually believe that Federal Reserve officials are lying when they say that they will continue to fight inflation.
It's All About the Federal Reserve Now
This goes to show just how shot the credibility of the Federal Reserve is now. This is what happens when you bend you will need to Wall Street for 14 straight years. Now that we are in a situation where they may actually have to do their job, Wall Street doesn’t believe that they have the wherewithal to do so. Because of this, I think you have to look at it through the prism of perception over reality. Right now, traders perceive that the Federal Reserve is going to bail them out. However, with the jobs number coming out on Friday, that might set up a very bloodied day if the number comes out in the wrong direction for Wall Street.
If you are an investment banker or a trading firm, you are hoping for poor employment numbers. This is because it means that the Fed may not have to tighten much, and you may get your cheap/free money. This is how far from the financial markets have drifted from economic reality, because of the Federal Reserve itself. This is a mess that the Fed has created, and quite frankly in order to fight inflation, they are going to have to break something.
If we get a stronger than anticipated jobs number, the US dollar will probably spike against the Japanese yen because it will make the Bank of Japan step in and start buying more bonds. Part of the reason the Japanese yen has strengthened a bit over the last couple weeks has been that as rates drop around the world, the idea is that it takes less effort by the Japanese to keep the 10 year yield down to 0.25%. We are living in bizarro world, so you might as well get used to it.
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