Stocks finished flat on the day despite the and rates falling sharply following weaker-than-expected and reports.
Notably, the ISM report revealed a surging index, which climbed to 68.7, the highest reading since November 2022.
Still, that wasn’t enough to offset the weaker-than-expected headline reading, which came in at 49.9 versus estimates of 52, and the report, which showed just 37,000 jobs created in May against estimates of 110,000.
This likely places additional importance on today’s data and, more significantly, the jobs report on Friday. Continuing claims have been steadily rising, and this trend is likely to come into sharper focus today as well.
This ended up sending the rate lower by nearly 11 bps on the day, closing at 4.35%, and pushed the down by 41 bps. Should this trend continue, it will likely bring the US/JGB interest rate differential back into focus, as the spread between the US 10-year and the fell by 14 bps to 2.84%, placing it back near a critical support level.
A break of support in the interest rate spread would likely result in a decline in , potentially pushing it below 140.
There used to be a correlation between the USD/JPY and , but that relationship appears to have weakened recently, and the reason for this is unclear. It might be that we won’t fully understand the reason until the USD/JPY drops below the critical 140 level. For now, 140 has been a solid barrier for the USD/JPY.
The odds of my reversal pattern in the playing out continue to fade. The only thing keeping it alive was the late-day move lower, following the formation of a head-and-shoulders pattern after 11 AM. A close below 5920 today would give the pattern another chance to survive for at least one more day.
Meanwhile, the 2B top pattern on the continues to survive, but only by the narrowest of margins. yesterday’s price action nearly reinforced last week’s topping pattern, given the intraday move higher followed by a lower close.