The Dollar is losing some strength after a bad jobs report and a low level of wages
The Dollar closed little-changed against most currencies after hitting 2018 highs following lukewarm Payrolls data. The US economy added fewer jobs than expected in April. However, the Jobless Rate fell to 3.9%, its lowest level in more than 17 years. Average Hourly Earnings (Wages) dipped from March. The tepid wage growth saw the US Ten Year yield close flat at 2.95%.
Euro area PMI data failed to impress leaving the Euro limp.
Outlook: Traders looks past the US Payrolls data and lifted the Dollar Index (USD/DXY) to 92.569 from 92.446 Friday. While the gain was modest, it managed to hold above the trendline of 92.50. Much of the Dollar’s gains came against the Euro and Sterling. The Aussie and Yen were a tad higher. The Dollar closed above Parity against the Swiss Franc (1.0001, from 0.9981 Friday) for the first time since November 2017.
Trading View: The benchmark US Ten year bond yield fell to 2.90% following the disappointing Payrolls gain before rising to close flat at 2.95%. Which is still far from the high 3.03% close on April 26. Further Greenback gains will need to see yield support.
Speculative market positioning saw further trimming of Euro and Sterling long bets. Meantime Australian Dollarshort bets increased. Japanese Yen longs reversed to turn mildly short.
Fedspeak following the US Employment report was mixed. Outgoing NY Fed President William Dudley said that while he was optimistic on growth, it is too early to judge that the economy has overcome persistently low inflation. San Francisco Fed President John Williams said he does not see any abrupt rise in inflation happening which he saw was rising above the 2% threshold with continued gradual rate hikes appropriate.
The week ahead sees US Headline and Core CPI data on Thursday. The RBNZ and Bank of England policy rate meetings are also on Thursday.
While the Dollar’s upward momentum slowed, the trend still points north. US data continue to outperform while that in Europe, the UK and Japan underwhelm. Further substantial Greenback gains would need to see fresh yield support. The global trade situation for best the part remains unresolved and this may yet prove a headwind for the Dollar.
The Dollar Index (USD/DXY) – closed at 92.569, above the December 2017 trendline support of 92.50. But only just. USD/DXY has immediate support at 92.40/50 (overnight low was 92.354). Further strong support can be found at 92.00. Immediate resistance lies at 92.80/90 with the overnight high traded 92.900. Without fresh yield support, it’s difficult to see a sustained break above 93.00 just yet. Likely trading range today 92.35/92.85. Look to trade this range.
EUR/USD – while the Euro managed to bounce off its lows (1.19104), it still closed 0.28% lower from Friday’s 1.1990. Euro area PMI data failed to impress. German and Euro Zone Final Services underwhelmed. German April Retail Sales rose less than forecast, falling below March’s figure. EUR/USD has immediate support at 1.1950 and then 1.1920. Immediate resistance lies at 1.1995/1.2005. A break below 1.1910 could see us trade to the 1.17-1.1800 range. A break above 1.2050/60 could see a short-term recovery back to 1.2150. Likely range today 1.1930-1.2030.
GBP/USD – also kept a bearish tone finishing 0.33% lower at 1.3535 (1.3570 Friday), despite a bounce off lows. Expectations for a BOE rate hike at their policy meeting this Thursday have all been thrown out the window following negative news from the UK. Immediate support lies at 1.3500 and then 1.3480 (overnight low 1.34863). Immediate resistance can be found at 1.3560 and then 1.3590 (overnight high 1.35859). Likely range today 1.3510-1.3590.
USD/JPY – gained versus the Dollar with the US Ten-year yield stuck at 2.95%. The Dollar closed at 109.08 from Friday’s 109.18. USD/JPY has immediate support at 108.80 and then 108.60 (overnight low traded 108.649). The support at 108.60 is strong and would need to hold for another attack at 110. Overnight high was 109.27. Immediate resistance is at 109.30 and 109.60. Look to trade a range today, likely 108.85-109.35.
AUD/USD – managed to hold strong support just above the 0.7485 with an overnight low traded 0.74924. The Aussie closed at 0.7538, a tad up from Friday’s 0.7532. AUD/USD traded to an overnight high of 0.75606, where immediate resistance lies. Immediate support can be found at 0.7510 and then 0.7485. Look to trade a likely range of 0.7490-0.7560. Just trade this range shag.
Today sees the release of National Australia Bank’s Business Confidence Index for April. Chinese Trade Numbers and Australian April Retail Sales are out on Tuesday.
Wednesday sees US PPI data while Thursday is the big event day with the RBNZ and BOE rate policy meetings and US CPI numbers.
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