USDJPY breakdown despite firm US jobs data

Welcome to the Saxo Market Call. Before we get started, it's important we emphasize that the views and opinions expressed in this podcast are those of the host and guests and do not constitute investment advice or recommendations. All information provided is for educational and entertainment purposes only. Hey everyone, it is Monday, 7th of September, 2026, and we have Dalian breaking down below 155, a really key event, and a very interesting event as well after, you know, we cooked up all the scenarios Friday for what would be the most supportive of a further yen rally, figuring that that would be a weak set of U.S. jobs data, and what we got was relatively strong across the board, not super strength, sort of Goldilocks data, hot enough to be risk positive, but not so hot that it would have, you know, apparently at least destabilized the Treasury market and sent yields to sustainably higher levels, which it did not. So the yields sort of responded, the dollar responded as well, and then the price action kind of eased a bit, and we faded back towards a little bit lower in yields and in the dollar, and it feels more comfortable to be looking for higher yen levels. Now that we're breaking down below this key 155 area, let's of course see the price action. It is a holiday in the U.S. for the U.S. markets today, Labor Day weekend. Extended into today. But yeah, I mean, it just makes sense given how we closed Friday that those looking to reprice yen are emboldened here. Could to some degree be official intervention, but we have mentioned the other factors, the Bank of Japan getting more serious, signs that the government pension fund in Japan, GPIF, it's called one of the world's largest, if not the world's largest fund, is looking to reprice or to reallocate its portfolio. At least the inference is there that they will do this in some coming timeframe after this meeting was called in August, where it was mentioned that allocations were on the agenda. As well, you have positioning, and we mentioned on that front last week, the Bloomberg article referencing JP Morgan's estimation that there's over 100 billion U.S. dollars in these long carry trades, where you're long the dollar or other currencies versus the Japanese yen, and that 155 felt like a key area that could have some sort of cascading SOP levels, people wanting to get out of the market because the technical level was violated, and it could drive Dolly into 142 to 146. Seems like a reasonable prospect to me, as long as we're not spiking higher in the U.S. Treasury yields, which we did not, again, after that Friday jobs report. Just a brief recap there. So what we actually saw, yes, the worst data point, the least interesting, because it always gets revised, but of course, the market pays attention to it. The non-farm payrolls change itself. Was it one 62 versus 55 expected, and that's one of the better beats in a while. Then we saw the two-month revision being slightly positive as well. On the unemployment rate, we saw an unchanged reading of 4.1%. That was expected, but the participation rate ticked up. So when you have that combination, the steady rate but participation is higher, that's a bit more positive because the labor force is larger, and yet the unemployment rate stayed steady. There was even a little bit of marginal positivity on the earnings front, hourly earnings, which were steady despite the work week being, at least the estimate, being 0.1 larger or longer, meaning that people are taking home more wages. So again, in the Treasury market reaction, we tried the highs of the cycle, even new highs in the case at the front end of the curve, trying to price the FOMC meeting, 4.41 plus percent traded. On the two-year benchmark, but we ended the day back down just below 4.37%. I think it makes some sense that we didn't get some wild sell-off in Treasuries and new spike in yields. The data is not that big of a surprise. Plus, the recent emphasis, at least from Fedsher Warsh specifically, was that, look, it's inflation that is the focus, not so much the labor market here. So we'd have to see more labor market data before we got this kind of reactivity. And that cues us, cues the focus up for this Friday's CPI. So the dollar rally as well was partially reversed on Friday, and we're seeing it more profoundly reversed here to start the week, of course, in dollar yen, which is breaking down and opening up the unknown sort of what is the next level. It's not to 150 on the chart kind of territory. But even elsewhere, the dollar a bit weaker. Euro dollar sort of rewinding a bit. The focus definitely is on the yen. If you look at euro yen, it is also breaking down below the key 180 level again for the first time in a while. And then there's a minor low below in the low 179s, I believe it is, that would be a new low for 2026, if that is achieved. Other dollar pairs of note, Aussie dollar breaking to a new local cycle high here. So let's see if that continues to progress higher. I'm sure Aussie yen would have been one of the more popular carry trades. So there's maybe a bit of tension there between Aussie dollar higher and Aussie yen being under pressure. So yeah, big focus on macro. I'll get to the equity market performance in a second. Actually, I'll go ahead and do that now. There's there's a little bits and pieces of interesting news to talk about. Elsewhere with the Hormuz Strait, we're actually seeing tankers, Iranian tankers attacked by the US. There's footage of these things being, I guess, struck by missiles or whatever it is. And we did see a fresh spike. And I remember this is Brent crude, or sorry, Brent November crude versus the prior October contract. So there has come up quite a bit with this new contract that has rolled into the as the front month, we traded almost a 98 bucks a barrel, it's a decently back below that, just as I was heading in here to record the podcast. But we have this focus on refined products. And those prices are in a totally different universe relative to the normal ratios. As we have also emphasized, you've got diesel prices in the US, I believe it's a record, it was certainly higher than that previous spike from the Ukraine war for onshore US diesel prices, getting towards $6. per gallon, just for perspective, how much is that it's adding as much as $30,000 in fuel costs for a long haul large US truck for a yearly basis relative to I'm not sure what baseline but it just gives you an idea of how expensive that is making the likes of diesel and trucking. And it propagates through to other areas where diesel is used in the economy, construction equipment, farming equipment, etc. And as Ola pointed out as well, I'm not sure if it was it was since the the Hormuz Strait was effectively closed by the hostilities breaking out in the Iran war. But over some time period recently, Qatar managed to get 18 ships, LNG ships out over a time period that normally would have seen 300. So this is of course, pinching the supply side on LNG shipments. So got to keep an eye on energy as well for broader risk sentiment. And that was actually sort of mixed, to say the least on Friday, going back to our classical, you know, some parts of the market doing well, and then negative correlations as other parts are actually in quite a negative mood. And in this case, it was the AI hardware type names that were quite positive. We have the SOX index up three point almost 3.4%. On Friday overnight, the Cospi was up over 4%. Nikkei had a good session. I'm not sure if how well it closed, though, it's like think some of this yen strength is starting to creep in before the close. Interesting to see how that impacts Japanese sentiment, especially when the end can move almost 2% on a day when on days like this, if it is really revving up here, but back to the Friday session in the US. So a broader market was actually slightly negative, even though the NASDAQ 100 was up very slightly. Some of the most positive performing names were our usual suspects, you know, companies like SanDisk, I think was the top performer in the S&P 500. I saw a mix of different semi names, hard disk names, corning, all this, all this stuff, doing quite well and leading in the in the leaders column. And then some of the names sprinkled in the worst performing column, or the likes of Adobe workday service now. So again, that software as a service, negative correlation to whatever the momentum AI stocks are doing, seems to be back for the moment. But overall, we closed Friday, or we're sorry, intraday Friday, we saw actually the VIX trading at its lowest level of 2026. So that whole recent little, you know, wrinkle, or what would you call it? Modest sell off, to say the least, we upped our concern levels based on where treasury yields were heading, etc, based on the underperformance of hardware linked to AI, etc. But it never caught fire. And now we're back into rally mode, at least for momentum names, but I would still say we're still within the hinge point of something potentially unfolding in either direction. I would continue to say that that bond yields, treasury yields are a key focus through not just the CPI this week, but through the FOMC meeting for September. The odds are a bit higher again, but we're still a little bit in the dark on what the Fed's thinking is here on on policy rates. One other notable performer, we talked about it quite a lot. I can't remember if it was Thursday or Friday's podcast, but Tesla down 6%. This is after the recent, quite a decent boost on the on the company's plans to put cyber cabs on the streets, the cyber cabs, the actual one without the pedals and the steering wheel, apparently regulators are not so thrilled on the compliance, some compliance specific there. So could that be the hindrance that even prevents this planned launch from unfolding? Oh, and I should mention that one of the reasons for the strong semiconductor vibe through into early trading today could be this OpenAI ChatGPT version 6 that is hitting the streets, the latest greatest model, and of course, allows you to do more and more intense token consumption and agentic this and that. So that could be getting some of the focus. Looking ahead at this week on the earning side, as we highlighted late last week, the key to the reporting for two very different themes here, Adobe, one of the big software as a service names, of course, by the way, it closed right on its 200 day moving average. And that was after this incredible run, it traded at one point at a incredibly low price of 190 rallied all the way to 290 plus. Recently, I think as recently as last week, it was trading there and closed Friday near 266. So is that sort of, you know, over punishment of software as a service cycle now that we've seen quite a bit of mean reversion, to say the least, talking about a more than 50% rally, it has that sort of, you know, played itself out? Or is there more to squeeze out of that theme? That would be a key question, depending on what they report. Also reporting Oracle, of course, the hyperscaler that has extended itself most aggressively in terms of its balance sheet and negative cash flow to, to provide as much capacity as possible. What does it actually report? How does the market treat this kind of, you know, this sort of bleeding edge, if you will, of how aggressively these hyperscalers are operating. And then I haven't seen because markets are closed in the last couple of weeks. So I think that's a good question. I think it's a good question. I think it's a good point. I think we're building towards something in Europe in the coming year, or more, with the rise of populist parties that was most in evidence. If you just look at the German, for example, political polls, you've got the AFD polling at 28% versus the ruling CDU party, CDU, CSU coalition, whatever, at around 21%. And the Social Democrats are just down in the absolute dump. So really remarkable stuff. The political center, Canada Hold, is the key question going forward. And this weekend election in Saxony-Anhalt was very interesting. It's a former East German state, population of only 1.7 million, but still the rise there and the Alternative for Deutschland performing at the high end of their polling going into the election for the state, 43.8% was the result. Now, they can't form a ruling government with that percentage, even though around 70% of the vote was a result. So I think it's a good thing for them to be able to do that, but I think it's a good thing for them to be able to do that. So I think it's a good thing for them to be able to do that, but I think it's a good thing for them to be able to do that, but I think it's a good thing for them to be able to do that, because they didn't reach the parties for those 7% did not reach the 5% threshold, 5% per party threshold, meaning that that 43.8% for AFD would bump up towards closer to 47%. And they would have to find a coalition partner. And they're largely considered beyond the pale for any mainstream party, whether it's the Greens, the CDU, the, of course, the SPD. So I think it's a good thing for them to be able to do that. And I think it's a good thing for them to be able to do that. Or others. But there is one party, a left populist party, very strange one by other country standards, called the BSW, named after the founder of the party, Wagenknecht. And they did clear the 5% and would be able to form a majority coalition. But they have a, while they're sympathetic with the AFD on things like immigration, being anti-immigration, that is being against the Ukraine war, and wanting to plug back into cheaper Russian natural resources, natural gas, etc. They have a very different leaning on the economic policy side, far more left-leaning versus the more sort of free market, pro-free market AFD. There's some other policy differences in education, etc. I don't want to get too much into the weeds. But could these two form something together? It doesn't mean anything necessarily nationally, but it just sets a model potentially for what could be going on elsewhere. And again, given those national polls, I mean, Chancellor Mertz is under tremendous pressure. Supposedly, he'll be out speaking this afternoon, I'm sure, a little bit on the election results, among other things. Okay, now for a few links that I will put in the podcast episode description, if you'd care to follow those. I think some interesting stories worth a consideration. First, came across from a trusted source, points to an X post. So a post on X by clearly a copper enthusiast, if you could put it that way, with some very stark figures on the difficulty of finding new copper reserves and producing them, like developing them, meaning like if you do find a chunk of copper in the ground, can you even develop it because of all the environmental permitting that is such a hurdle to getting these things going. But even if you do find that chunk of copper, in the ground, which is almost not being done anymore, the discoveries are minuscule compared to the old days, it can take 15 to 20 years to develop. I mean, there's just such a dire long term copper shortage, relative to any sort of notion that we're going to electrify the global economy, and continue to build out AI at anything resembling the current pace, it just doesn't add up. So there's going to need to be a his argument is, there's going to need to be a just a tremendous price signal to get that price signal. It's going to need to be up to the production level, up to where it needs to be to meet the demand. And then out of curiosity, I was thinking about the space economy, there was a story on FT, that was quite widely read about this German space set up ISAR, ISAR, I don't know how you say it, ISAR, they had their second launch, their first launch was a failure, but this this launch succeeded, I think they managed to deploy three small satellites into space. So finally, while Europe has this, Ariane, and then the big sort of government supported rocket set up a space, space agency set up, this is the first sort of private, private sector fully, you know, startup type space outfit, I was doing, I had a thought about, okay, SpaceX, for example, you know, expected to deliver these, these ability to deploy large cargoes into space. And I've heard that they're asteroids that have insane amounts of gold. So I said, well, we have this copper shortage could, you know, is there copper elsewhere in our solar system that is accessible? And the answer is apparently yes. Of course, the practical bit about extracting this stuff, it's it's mind boggling to even consider this. But if there is some ability to assemble and launch mining equipment in space, and send it to an asteroid. According to jet chat GPT, at least one large asteroid could have hundreds of times the Earth's presently identified copper resources. Now, it's not because you would mine that copper and then like bombard it back onto the Earth. But the idea could, I guess, supposedly be if you could get out outer space manufacturing going, you could assemble these, these data centers, all the way from actually mining or to I guess, printing the circuits somehow in outer space. I know it sounds farfetched, but it was just a just a little rabbit hole went down to see what kind of off Earth minerals are available. And then there was one I had to I was just in a rush to get in here to get started with the podcast, but a very interesting piece from and this is from FT Alphaville hat tip to them. The title of the piece is an alien mind. And it's written by open AI is chief scientist, Jakob, but Petrotsky. And he writes about essentially, you know, where we are with the level of AI to a degree, at least. And that is, you know, something that he thinks can transcend human intelligence. And he talks a bit about alignment. So alignment being, you know, can we align these, these AIs to human needs and to make sure they're safe for humans, any sort of expressing at the end of the piece, this hope that AI researchers and AI outfits will have some kind of voluntary slowdown, as he calls it, that they'll just somehow become commonplace to have these voluntary slowdowns until shared. Well, we better hope so, because this sounds a bit scary. And we talked last week a little bit about this Hugging Face incident, the way these swarms of AI agents could act basically beyond the original instructions, trying to hack and cheat on tests and then cover up their trails, et cetera. Unanticipated behavior. It gets a bit dicey, I must say. And I can understand why people, there are people that are concerned about that. And I think that's a good thing. I'm not concerned about the safety of all of this, but just an interesting post from him. And then also in the wake of this German regional. election, there's a Michael Every piece on the politics of Europe. I'll pass it along. It's one of his, I think it's Global Daily or whatever, where he says a lot of these things, what's going on in Spain, for example, what could be going on in France as well, and Germany. It's all related and it's the mainstream of European politicians are not listening to their people. And at some point they may pay the price for this, I think is the general gist of what Michael Every would say. And maybe it's the situation is a bit more explosive in Europe because you have this idea in Germany of the so-called Brandmauer or firewall that, oh, as long as we keep these guys below the 50%, we can just continue to be the blind leading the blind and not have to listen to our people. Well, at some point, once that threshold is crossed by the populace, you wonder what their potential for retribution, revenge or whatever is. I think you can paint things as being a bit stark here, but Europe has sort of delayed its populist moment, which is very much potentially out there, just like the US has been in its populist moment since the 2016 election has been grappling with that for better or for worse since then under the Trump one. Biden's attempt to sort of incorporate some of what Trump was doing, at least on the industrial policy front, but certainly not on the more populist social policy and other fronts. And now we have Trump two, and where is this all headed is very uncertain. But Europe has not even gotten really to first base in terms of the populists seizing control in any notable single country, at least. So I think that's worth consideration as well. All right, that is a wrap for today. Stay careful out there. Very interesting to see how this dollar-yen move develops, whether there's any kind of bleeding through to broader risk sentiment. If it gets particularly violent, a dollar-yen move and other yen cross move. And yeah, this setup going into tomorrow as the US is back from its long weekend. Again, stay careful, and we'll be back soon with the next Saxo Market Call. Saxo. Serious trading worldwide.