Dollar did not maintain strength despite positive economic data released on Friday
A stellar US Payrolls report which beat forecasts failed to boost the Dollar significantly. Tariff and trade fears lingered and provided a headwind for the Greenback. The Euro, down 3.2% in May, recovered off its lows as the political turmoil in Italy and Spain eased. The solid Jobs report lifted stocks and yields.
Outlook: The US Payrolls report was a blockbuster. It beat forecasts in Jobs creation while unemployment hit an 18-year low. Wage gains rose above forecasts. Only the participation rate declined. Traders noted President Trump had tweeted that he was looking forward to the release, an hour before the release…
Trading View: The solid Jobs numbers pave the way for the Fed to hike rates this month. The US 10-year bond yield rose 4 basis points to 2.90%. Easing political tensions in Italy and Spain saw Italian yields continue to slide while Germany’s 10-year yield climbed to 0.38% from 0.33%. Trade tensions provided a counterbalance for the stellar jobs report and remain a risk to global economic activity.
Events and economic data releases today: Australian May Retail Sales, UK May Construction PMI, Euro Zone PPI and US Factory Orders.
While the Dollar Index (USD/DXY) ended 0.19% higher (94.156) the Greenback’s performance against its main Rivals was mixed. The Euro slipped from Friday’s opening while the Aussie, Canadian Dollar, Swiss Franc and Kiwi were little-changed. Sterling rose as data showed a pick-up in UK Manufacturing for May. The Yen finished weaker, the result of a rise in the US 10-year yield.
G7 finance ministers meeting over the weekend saw six-member countries express concern and disappointment over US trade tariffs. G7 leaders have their summit meet this week in Quebec, Canada.
The Dollar Index (USD/DXY) jumped immediately to 94.450 after the release of the US Payrolls report. However, it drifted lower for the rest of the day. The Dollar Index traded to a low of 93.88 before settling to close at 94.156. Immediate resistance can be found at 94.30 and then 94.50. Immediate support lies at 94.00 and then 93.80. The failure of USD/DXY to break above 95.00 may signal a corrective move to the low 93/s high 92/s first.
EUR/USD – slumped to an overnight low of 1.16171 before climbing to close at 1.1665. Overnight high traded was 1.1718. EUR/USD has immediate support at 1.1630 and then 1.1600. Immediate resistance can be found at 1.1680 and then 1.1720. EUR/USD should consolidate within a likely range of 1.1630-1.1730 today. Look to sell Euro on rallies.
GBP/USD – rallied to on the back of a better-than-forecast UK manufacturing PMI for May. Sterling has been under pressure for the past two weeks. Downbeat data and pessimism over Brexit, coupled with a generally stronger Greenback has weighed on the British Pound. GBP/USD fell to a low of 1.3254 before lifting to 1.3300 and then 1.3362 (overnight high) before settling at 1.3352 (NY close). GBP/USD has immediate resistance at 1.3360/70 and then 1.3400. Immediate support can be found at 1.3325 and then 1.3310. Look for consolidation today with a likely range of 1.3310/80. Prefer to sell rallies ideally to 1.3400 UK Construction PMI data is released later today.
USD/JPY – finished up 0.66% at 109.52 (108.83 Friday). The lift in the US Ten-year yield to 2.90% supported USD/JPY. Japan’s 10-year JGB yield rose 2 basis points to 0.04%. Over the weekend, BOJ Governor Kuroda said that inflation had recently been weak in spite of steady economic build-up despite the BOJ’s massive stimulus program. Immediate resistance for USD/JPY lies at 109.80 (overnight high 109.733) and then at 110.00. Immediate support can be found at 109.30 and 109.10. Likely range today 109.10-109.90. Look to trade this range.
AUD/USD – closed little-changed at 0.7569 (0.7567 Friday). AUD/USD traded to 0.7574 overnight high following a drop to 0.75147 following the US Jobs report. The Aussie has traded between 0.7480 and 0.7610 for since mid-May. This week is a big week for the Aussie data and event wise. Australian May Retail Sales are released later today. The RBA monetary has its rates policy meet tomorrow. Australia’s Q1 2018 GDP data is due Wednesday. Immediate resistance lies at 0.7580 and 0.7600. Immediate support can be found at 0.7540 and then 0.7520. Likely range today 0.7530-0.7580. Prefer to buy dips.
USD/ZAR – The rand stood firm, dipping slightly on Friday afternoon in the wake of the release of better-than-expected US economic data.
The local currency briefly weakened from R12.65/$ to R12.73/$ after data from the US Bureau of Labor Statistics showed gains of 223 000 non-farm jobs for May, above forecasts of 190 000.
The rand was trading at R12.69 to the greenback at 15:00.
While the rand fell in the wake of the release of the US data, it was still trading even for the day in the early afternoon. It had opened trade at R12.69/$ and initially strengthened before weakening.
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