* Biden hints of Israeli strike on Iranian oil sites sends oil surging

* Key Japan ministers show united less hawkish front with BoJ

* US job growth expected around 140k as unemployment stays flat

* S&P 500 wavers as it tries to shake off rough October start

FX: USD rose for a fourth straight day through resistance sits around 101.88. The buck also closed just above the September highs at 101.83/91. Middle East tensions and an expected Israel attack on Iran had investors nervous. The dollar was strong versus every other major currency, with the safe haven CHF and JPY not far behind. The strong ISM services figures helped the bid, though the employment component fell below 50. Focus turns to today’s US monthly employment data, with geopolitical events looming large.

EUR slid for a fifth day in a row but outperformed most other G10 currencies. Eyes are on the mid-September low at 1.1001 with a major Fib level below at 1.0974. Eurozone/US two-year yields spreads continued to widen.

GBP tumbled after dovish comments from BoE Governor Bailey. He said the bank could move aggressively to cut interest rates if inflation pressures continue to weaken. Cable fell below the first retracement level (23.6%) of the April rally at 1.3160. Next support is around 1.30 with the 38.2% Fib level, plus the July high and September low,

USD/JPY hit a four-week high as another BoJ member said the bank must move cautiously and slowly to avoid hurting the economy. The next major upside level is 148.66.

AUD sold off on deteriorating risk sentiment. The 0.6871/99 zone of resistance appears strong. USD/CAD pushed higher up above the 21-day SMA at 1.3542 into the first retracement level of the August sell-off at 1.3556. Oil ramped higher after Biden’s comments about an Israel attack but that didn’t offer any help to the loonie.

US Stocks traded lower but were relatively contained. The VIX closed just above 20. Its long-term average is around 18. The S&P 500 closed 0.17% lower to settle at 5,699. The tech-heavy Nasdaq 100 lost 0.05% to finish at 19,793. The Dow settled down 0.44% at 42,011. Energy outperformed by far, with only tech and communication services in the green. Nivida led the gains, jumping over 3.3%. CEO Huang was on CNBC saying that demand for the new Blackwell next-gen AI chip is “insane”. Nvidia also announced a “watershed” partnership with Accenture while analysts said OpenAI’s $157bn valuation indicates a huge spending growth stage to come.

Asian stocks: Futures are in the red. Asian stocks were mixed, eyeing up Middle East tensions and holiday closures. The ASX 200 was tepid with mixed trade figures and downward PMI revisions. The Nikkei 225 outperformed on yen weakness after dovish comments from PM Ishiba and BoJ Governor Ueda.  The Hang Seng tanked on profit taking and signs China stimulus euphoria was wearing out.

Gold traded in a tight range printing an inside day. That meant the high and low sat inside the previous day’s range, denting some indecision. Prices are hovering below the record top at $2685, with near-term support at Monday’s low of $2624.

Day Ahead – US Non-Farm Payrolls

This is a huge risk event after the Fed’s recent pivot toward placing more emphasis on the full employment part of its dual mandate. That sais, we do get one more NFP report before the next FOMC meeting in early November. Consensus looks for 145k jobs to be added to the US economy in September versus 142k in August. The unemployment rate is seen unchanged at 4.2%. The FOMC’s September projections predict the jobless rate rising to 4.4% by the end of this year. Average hourly earnings are forecast to rise 0.3% m/m  and average workweek hours are seen unchanged at 34.3hrs.

Although job gains remain positive, they reflect a slowdown compared to recent years. Hiring expectations are decreasing which suggests that payroll growth may average around 100k month into the year. Lead surveys of hiring demand are deteriorating, and consumer confidence readings suggest that households are starting to experience a cooling economy. That said, some economists are expecting a stronger headline print due to temporary seasonal effects and overstatements related to the BLS birth-death model.

Chart of the Day – Nasdaq 100 NFP scenarios and levels

• An inline report likely means a smaller rate cut of 25bps should continue to be favoured. Those odds are currently around 67%. Fed Chair Powell cooled expectations of another 50bps move earlier in the week. Revisions will be important, as always, with some economists confessing their lack of confidence in the headline number due to recent big revisions. Stocks may extend their weekly downtrend with geopolitical tensions to the fore, with risk taking off the table ahead of the weekend.

• A Goldilocks scenario would be moderately better numbers and could see a bid to risk on solid growth prospects. But a much stronger report could spark ‘no landing’ fears and a delayed easing cycle, which would hurt equities.

• Softer data likely means “bad news is bad news” with bigger rate cuts potentially due to a slowdown and recession. The Nasdaq 100 could then see selling.

Key downside levels to watch in the tech-laden index are the 21-day SMA at 19,531 and a major Fib level at 19,444. Bulls will target 19,989 and 20,273 ahead of record highs.