Today’s non farm payroll release is significant for a number of reasons, particularly if the numbers come in better than expected and validate the Fed’s interest rate path of further increases in 2019. Until yesterday markets had generally ignored the implication of higher interest rates, but with the yield on the 10yr Treasury Note now above the key 3% level, and both the Dow and Nasdaq falling sharply these two events have not only given traders and investors a jolt, but also signal that we may now be at an important inflection point as money flow rotates into bonds and out of stocks. Of course, yesterday’s falls will have included an element of profit taking ahead of today’s data and what is known as ‘The October Effect’.

‘The October Effect’is a theory that stocks tend to decline during October, a view derived from the fact that some of the biggest markets falls have indeed happened during this month. And from a historic perspective there are some dramatic examples from 1929 to the great crash of 1987 when on 19th October the Dow fell 22.6% in a single day. But in reality October is no more dangerous for stocks than any other month, but investors may have decided that a combination of the Fed and ‘The October Effect’ it may now be time to rotate from stocks into bonds. And today’s NFP may help to validate that decision.

Against this background the US dollar has continued to move higher with 96 the first important upside level with 96.86 the key as this is the early August 2018 high.

To the downside the 95 region provides some decent support with stronger support at 94 which is where the volume point of control sits on the daily chart.

So in summary a very important NFP release, not just from a forex perspective, but also for all the capital markets.