The sharp US dollar rally in response to the unequivocally strong jobs data left short-term technical indicators a bit over-extended, and the consolidative tone now is not unexpected.  The dollar’s pullback is minor, and it did manage to extend its gains against the yen.It has pushed a little through the JPY123.50 high set on August 21 just before the August 24 collapse to almost JPY116.00. 

The dollar’s gains against the yen seem vulnerable, although the US 10-year yield is edging a bit higher. The S&P 500 is called lower, and European shares mostly a bit lower as well. Intra-day technical readings suggest if a dollar high for the day has not been recorded, it is close.Initial support is seen near JPY123.

The yen’s losses before the weekend and earlier today helped lift the Nikkei by nearly 2%. Exporters and Japanese banks were among the strongest sectors.There are two developments to note.First, the junior coalition partners in the Abe government has endorsed an economic stimulus package that is tied to Q3 GDP, which will be reported on November 16.Many economists expect a small contraction.  

Second, Japanese wages are slowly firming.Regular pay rose for the seventh consecutive month (0.4% year-over-year).Moreover, adjusted were inflation, real wages rose 0.5% in September after a 0.1% increase in August.Overtime and bonus payments were each up 1.4%.Total cash earnings were 0.6% higher from a year ago, which is also a little more than expected. 

China’s reserves figures out over the weekend suggest capital outflows are steadying. China also reported a record trade surplus, though imports and exports fell.Tomorrow China reports inflation figures.Softer CPI and continued deflation in producer prices is expected to result in easier PBOC policy in the months ahead. The decline in China’s imports and prospects of Fed tightening is a headwind for many emerging markets.