DXY, US Bond Yields Rebound on Mixed Payrolls Report

USD/JPY Climbs, Euro Dips; AUD, NZD, Asia-EMFX Ease

Summary:

The Dollar Index, a popular measure of the Greenback’s value against a basket of 6 major currencies, rebounded above the 104 level to 104.25 (103.65 Friday). FX trade was volatile ahead of 3-day US weekend due to the Labor Day holiday today.

A jump in the US Unemployment rate in August to 3.8% from 3.5% previously weighed on the Greenback, initially pushing it lower. The Dollar though rebounded on a strong Jobs creation of 187,000, beating analyst’s expectations of 170,000 jobs.

The US ISM Manufacturing PMI rose to 47.6, up from 46.4 previously and bettering median forecasts at 46.9. ISM Manufacturing Prices in the US were also higher.

The 10-year US bond yield climbed 7 basis points to 4.18% at the close of trade in New York. The US 2-year treasury rate settled at 4.88% from 4.86%. Other global bond rates were mixed.

The Euro (EUR/USD) slid back to 1.0785 from Friday’s open at 1.0845. Overnight, the shared currency traded to a low at 1.0835. Sterling (GBP/USD) eased against the overall stronger Greenback to 1.2595 (1.2670). Against the Swiss Franc, the US Dollar (USD/CHF) rebounded 0.2% to 0.8858 (0.8833).

Against the Emerging Market and Asian Currencies, the Dollar finished stronger. USD/SGD (Dollar-Singapore Dollar) rallied to 1.3540 (1.3515). The USD/CNH pair though eased to 7.2680 (7.2750). China’s Caixin Manufacturing PMI released on Friday beat expectations, rising to 51.0 from 49.0.

The Australian Dollar (AUD/USD) fell under the weight of broad-based US Dollar buying. On Friday, the AUD/USD pair finished at 0.6445 from its opening at 0.6485.

Wall Street stocks finished with modest gains. The DOW rallied to 34,798 (34,730) while the S&P 500 edged up to 4,512 from Friday’s opening at 4,508. Other global share markets were mostly higher.

Other economic data released on Friday saw the US Average Hourly Earnings (Wages) eased to 0.2% month-on-month in August, down from July’s 0.3%.

USD/JPY – The Dollar had a roller coaster ride against the Yen in volatile pre-long weekend US trade. The Greenback closed near its overnight high at 146.20 Yen against Friday’s open at 145.57. The overnight low was 145.35. The rise in US bond yields lifted this currency pair.EUR/USD – The shared currency eased against the US Dollar to 1.0785 New York close. On Friday, the Euro opened at 1.0845. The overnight low recorded was 1.0782 in volatile trade, before stabilizing.AUD/USD – The Aussie Dollar finished lower against the overall stronger Greenback to 0.6545 in late New York, down from Friday’s open at 0.6485. The overnight low traded for the Aussie Battler was at 0.6436. The overnight high recorded was 0.6460.GBP/USD – Sterling fell against the broadly based stronger US Dollar, settling at 1.2600 from Friday’s open at 1.2670. In volatile trade, the overnight low recorded was at 1.2573 while the high traded was at 1.2734.On the Lookout:

Markets will experience slower trade today with the absence of US and Canada both celebrating their Labor Day to honor workers and recognize their contribution to society.

The economic calendar started off today with New Zealand releasing New Zealand Q2 Terms of Trade, which rose 0.4%, beating expectations of -1.3% and a previous -1.5%.

Australia follows with its Company q/q Gross Profits (f/c -.9% from 0.5% - ACY Fnlogix).

Australia’s ANZ August Job Advertisements follow (m/m f/c 0.6% from 0.4% previously – ACY Fnlogix).

Europe starts off with Germany’s July Trade Balance (f/c +EUR 18.0 billion from +EUR 18.7 billion previously).

Switzerland follows with its GDP Growth Rate (q/q f/c 0.1% from 0.3%; y/y f/c 0.5% from 0.6% - ACY Fnlogix).

The Eurozone releases its Sentix Investor Confidence report (f/c -19.6 from -18.9 previously – Forex Factory).

ECB President Christine Lagarde is due to speak at an event hosted by the European Economics and Financial Center, in London (11.30 pm Sydney time, today 04 September).

Trading Perspective:

The Dollar rebounded on the back of stronger US bond yields.

The benchmark US 10-year treasury yield rose to 4.18% from 4.11% Friday.

While other global bond rates climbed, the yield differential widened in favor of the US treasuries.

This will continue to provide support for the US Dollar against all its Rivals, to varying degrees.

Australia and Canada have their rate setting meetings this week.

The RBA (Reserve Bank of Australia) meets tomorrow (5 September) while the Bank of Canada has its meeting on early Thursday morning (midnight on Thursday, September 7).

Both central banks are expected to keep rates unchanged, at 4.10% (RBA) and 5% (BOC) respectively.

Expect Asia to consolidate as we begin a new week with the US and Canadian holidays today.

Trading ranges will keep intact, albeit with the possibility of further FX volatility.

USD/JPY – Against the Japanese Yen, the Greenback soared to finish at 146.20 in New York, up from Friday’s open at 145.57. The higher close in US bond rates supported this currency pair. Look for immediate resistance today at 146.20, followed by 146.50 and 146.80. On the downside, immediate support lies at 145.85 and 145.45. Look for more choppy trade, likely between 145.85-146.85 today. The risk is higher if US rates keep their bid. (Source: Finlogix.com)

EUR/USD – The Euro sank under the weight of broad-based US Dollar strength, finishing in New York at 1.0785 (1.0845). Immediate support is found at 1.0770 (overnight low trade was 1.0771). The next support level lies at 1.0740. Immediate resistance can be found at 1.0800 followed by 1.0840 and 1.0880. Look for a choppy trade session, likely between 1.0740-1.0840.AUD/USD – The Aussie Battler finished at 0.6445, down from Friday’s opening at 0.6485. Like the rest of FX, the Aussie’s fall was the result of broad-based US Dollar buying. On the day, look for immediate support at 0.6430 (overnight low traded was 0.6436). The next support level lies at 0.6400. On the topside, look for immediate resistance at 0.6460 and 0.6490 to cap any rallies. Likely range today, 0.6400-0.6500. Trade the range.GBP/USD – Sterling slid against the overall stronger US Dollar to 1.2595 in late New York, down from Friday’s open at 1.2670. Immediate support for the British currency lies at 1.2570 (overnight low traded was 1.2573). The next support level can be found at 1.2540 followed by 1.2500. Immediate resistance lies at 1.2640, 1.2690 and 1.2730. Look for further choppy trade today, likely between 1.2550-1.2650. Trade the range, the preference is to sell GBP rallies.

Have a good week ahead, happy trading and Monday all.

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