The dollar is down against currencies and traders awaiting the Non-Farm Payrolls report today
Haven picks Japanese Yen and Swiss Franc rallied as risk aversion rose, lifting the VIX (Volatility Index +5.3%). Mounting trade war concerns as well as protracted EM weakness weighed on market sentiment. The US Dollar eased heading into August Payrolls after the ADP National Private Employment report increased less than expected. Stocks fell, treasuries rose, yields dropped.
Outlook: Despite US Jobless Claims to hit a post 1969 low, private jobs numbers underwhelmed. The softer than expected private sector employment result undercuts analyst’s forecasts of an increase in August Payrolls. Watch Wages data tonight, they also matter. US ISM Services PMI beat forecasts.
Australia’s Trade Balance in August bettered analyst’s expectations. German Factory Orders fell.
Trading View: “Let’s get ready to rumble!” Michael Buffer’s trademark catchphrase says it all. It’s Friday, Payrolls day.Jobs Creation for August is expected to be around +190,000 from Julys modest +157,000. Average Hourly Earnings (Wages) are expected to ease from the previous month.
The fall in stocks saw Treasury prices rise and yields fall. The yield on the benchmark US 10-year treasury fell 3 basis points to 2.87%. Germany’s 10-year Bund yield slipped to 0.35% (0.38%). The yield on Japan’s 10-year JGB was flat at 0.10%.
Emerging Market stocks extended their fall while most currencies settled. The Dollar eased against the offshore Chinese Yuan (CNH) and South African Rand (ZAR). USD/RUB (Russian Ruble) was higher. USD/TRY (Turkish Lira) was little-changed.
Uncertainty on the trade front continues with President Trump due to announce a fresh tranche of tariffs against China later today. Chinese trade data is due out over the weekend. Look out!
Amidst all of this, current market positioning is still overbought US Dollars. Which is looking tired. Traders would need a much better-than-forecast Payrolls to re-invigorate the Greenback.
USD/DXY – The Dollar Index eased 0.09% to 95.022 at the New York close from 95.129 yesterday. Overnight low traded was 94.933. Immediate support lies at the 94.80/90 level followed by 94.40/50. The overnight high traded was 95.208, which is where immediate resistance can be found. The next resistance level is at 95.50/60. Look to trade a likely range of 94.80-95.30 today pre-Payrolls.
USD/JPY – slumped 0.65% to 110.71 from 111.52 yesterday. The Dollar got smacked by a double whammy of a lower US 10-year yield and risk-off sentiment. Overnight low traded was 110.52 which was hit when reports that President Trump is looking to target Japan next in his trade crusade. The report was more the opinion of a Wall Street Journal writer. Immediate support lies at 110.50 followed by 110.20, then 109.80. Immediate resistance can be found today at 111.00 followed by 111.30. The Yen has stayed relatively weak in the current environment but the rise in risk aversion and higher VIX could see Yen strength re-emerge. Watch this currency. Likely range today 110.40-111.10 before Payrolls. Prefer to sell rallies.
AUD/USD – rallied to 0.72109 following the better-than-forecast Australian Trade data before settling to close flat at 0.7200. Base metal prices and EM currencies steadied. AUD/USD traded to an overnight low of 0.7166 after local banks ANZ and CBA raised their mortgage lending rates. This reinforces the view that the RBA will keep rates low for some time to come. AUD/USD has immediate support at 0.7170 followed by 0.7140. Immediate resistance lies at 0.7220 and then 0.7250. Australian August Home Loans data is due out later this morning. Look for a likely range today of 0.7175-0.7225. Prefer to buy dips as the specs are short of Aussie.
GBP/USD – kept its gains versus the US Dollar, closing at 1.2930, up modestly from 1.2910 yesterday. The overall weaker US Dollar buoyed the Pound while Brexit remains at the forefront. The Irish border remains a sticky point in negotiations. Market positioning sees the speculative community well short of Pounds. Overnight high traded was 1.29624. Immediate resistance today lies at 1.2960 followed by 1.2990. Immediate support can be found at 1.2900 followed by 1.2870. Look for a likely range today of 1.2890-1.2990. Prefer to buy dips.
EUR/USD – The Euro eased to finish at 1.1625 after trading to an overnight high of 1.16592. Immediate resistance lies at that 1.1660-70 level. Overnight low traded was 1.16054. Immediate support can be found at 1.1600 followed by 1.1580. The Euro was leaned on by the drop in the EUR/JPY cross which fell to 128.65 from 129.70 yesterday. The EUR/CHF cross rate was also lower lead by the fall in the USD/CHF. Look for a likely trading range today of 1.1590-1.1650 today.
USD/ZAR – The rand strengthened by 1% against the greenback in early trade on Thursday, one of the first signs of good news in what has been a tumultuous week for the local currency.
The rand opened at R15.42/$, and after initially weakening, firmed by 1% to change hands at R15.27 to the greenback by 11:11.
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***Information contained in this newsletter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making but merely provides information from the market for its clients as additional information is made available as per the events occurring in the financial markets.
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