Dollar, Bond Yields Tumble; Next Up - US September Payrolls

Short Squeeze Lift Aussie, Euro, Sterling, EMFX; Stocks Settle

Summary:

A weaker than expected rise in the US September Private Employment data, the lowest in two years pulled the Dollar and bond yields lower. The benchmark US 10-year bond yield tumbled to 4.71% from 4.8% yesterday.

Private Payrolls in the US rose by just 89,000 jobs last month, way below forecasts of a 153,000 increase. September’s ADP gain was the smallest since January 2021.

The Dollar Index, a gauge of the Greenback’s value against a basket of six major currencies, slid 0.42% to 106.33 (107.02 yesterday). The Dollar’s drop was broad-based as traders pared positions.

The Euro (EUR/USD) rebounded to 1.0550 from 1.0470, an 11-month low. Against the Japanese Yen (USD/JPY) the Dollar eased to 148.41 from 148.81. Sterling (GBP/USD) rallied to 1.2195 from 1.2077.

After falling to a 3-day low at 0.6285 yesterday, the Australian Dollar (AUD/USD) jumped 0.70% to 0.6372. The Kiwi (New Zealand Dollar) rallied to 0.5967 against 0.5907 yesterday. New Zealand’s RBNZ kept its Overnight Cash Rate unchanged at 5.5%.

The Greenback was mostly lower against the Asian and Emerging Market currencies (EMFX). Against the Offshore Chinese Yuan, the Dollar (USD/CNH) eased to 7.3030 from 7.3210 yesterday. The USD/SGD pair (Dollar-Singapore Dollar) dipped to 1.3670 (1.3733).

Other data released yesterday saw Australia’s August Trade Balance climb to +AUD 9.64 billion from a previous downward revised +AUD 7.32 billion, beating median forecasts of +AUD 8.62 billion.

Germany’s Trade Balance rose to +EUR 16.6 billion from +EUR 16.0 billion and better than estimates of +EUR 14.9 billion. The US Trade Deficit eased to -USD 58.3 billion from -USD 64.7 billion previously.

EUR/USD – The Euro rebounded to 1.0550 in late New York against 1.0470 on Wednesday. The shared currency pared its losses on short covering by traders heading into today’s US Payrolls report. The overnight low recorded was 1.0499 while the high traded was 1.0552.USD/JPY – Against the Japanese Yen, the Dollar dipped to 148.40 (148.81). Weighed by lower US bond yields, the Greenback traded to an overnight low at 148.26 before rallying to its New York close. The USD/JPY pair traded to 149.12 overnight highs.AUD/USD – The Aussie Battler jumped from 0.6300 to 0.6372 at the New York close. Overnight the Aussie Dollar traded to a high at 0.6378. A strong rise in Australia’s Trade Surplus buoyed the Battler. The Aussie was mostly stronger against the other currencies.GBP/USD – Sterling finished stronger against the US Dollar, rallying to finish at 1.2195, which was the overnight high. On Wednesday, the GBP/USD pair was at 1.2077. Broad-based US Dollar weakness saw Sterling shorts squeezed.On the Lookout:

The US Non-Farms Payrolls report highlights today’s busy economic calendar. Japan kicks off today’s data releases with its Japanese Average Cash Earnings (y/y f/c 1.5% from 1.3% - ACY Finlogix) and Japanese Household Spending (y/y f/c -4.3% from -5% - ACY Finlogix).

Chinese markets will be closed today as they celebrate their National Day. Europe starts off with Switzerland’s September Unemployment Rate (f/c 2% from 2% - ACY Finlogix). Germany follows next with its German August Factory Orders (m/m f/c 1.8% from -11.7% - ACY Finlogix).

The UK releases its Halifax House Price Index (m/m f/c -0.8% from -1.9%; y/y f/c -5.0% fromm -4.6% - ACY Finlogix). Italy releases its September Retail Sales report (m/m f/c 0% from 0.4%; y/y f/c 2.2% from 2.7% - ACY Finlogix).

Canada starts off North America with its Canadian September Unemployment Rate (f/c 5.6% from 5.5% - ACY Finlogix), Canadian September Full Time Employment Change (f/c 20k from 39.9k – ACY Finlogix), Canadian September Average Hourly Wages (y/y f/c 5.5% from 5.2% - ACY Finlogix).

The US rounds up today’s economic data releases with its September Non-Farms Payrolls (f/c 170K from 187K – ACY Finlogix), US September Unemployment Rate (f/c 3.7% from 3.8% - ACY Finlogix) and US September Average Hourly Earnings (m/m f/c 0.3% from 0.2% - ACY Finlogix).

Trading Perspective:

Welcome to another US Payrolls Friday. Expect markets to trade in established ranges in heightened volatility.

Traders and investors will be cautious on the data releases with attention focused to comments from Fed officials following the report.

While the September US Payrolls (Jobs creation) forecasts are less than that of August, at 170,000 from 187,000, an improvement in the Unemployment Rate to 3.7% from 3.8% is expected. Wages in September are forecast to increase to 0.3% from 0.2%.

If the Payrolls gain is less than 170,000, say 150,000 or less, expect the Dollar to plummet against its Rivals. An NFP gain of 180,000 or more could see the Greenback continue its uptrend versus other currencies. Whatever the outcome, heading into today’s NFP report, traders should, as boxing’s Michael Buffer calls out, “Let’s get ready to rumble!”

Happy Friday and Payrolls to all.

EUR/USD – The shared currency bounced back against the Greenback following 3 days of losses, finishing at 1.0550, from 1.0470 which was an 11-month low. Immediate resistance lies at 1.0580 followed by 1.0610. On the downside, immediate support is found at 1.0520 followed by 1.0490 and 1.0460. Prior to the US Payrolls report, look for the Euro to stay supported against the Greenback. Likely range today: 1.0470-1.0570. (Source: Finlogix.com)

USD/JPY – The Dollar eased against the Japanese Yen to 148.40 from 148.80 pressurized by lower US bond yields. On the day, look for immediate support at 148.20 (overnight low traded was 148.25). The next support level is found at 147.90 and 147.60. Immediate resistance can be found at 148.80 followed by 149.10. Look for the Dollar Yen to trade in a likely range of 148.20-149.20 prior to the US Payrolls number. A strong Payrolls gain of 185,000 or more could see 150.00 tested. Watch for rhetoric from Japan Inc should USD/JPY climb.AUD/USD – The Aussie Battler got some respite from an overall weaker Greenback, jumping to 0.6370 at the New York close (0.6285). Look for immediate support in the Aussie Dollar at 0.6340 followed by 0.6310 and 0.6280. Immediate resistance can be found at 0.6400 and 0.6430. Look for the Australian Dollar to consolidate in a likely range today of 0.6340-0.6440. A strong US Payrolls report could see the Aussie test 0.6285 and lower. Tin helmets on.GBP/USD – Sterling soared to 1.2195 from 1.2077 against the overall weaker US Dollar. Look for immediate resistance today at 1.2230 and 1.2260. On the downside, immediate support lies at 1.2160, 1.2130 and 1.2100. Look for more the British Pound to consolidate against the Greenback in a likely range today of 1.2110-1.2210. A strong US Payrolls report could see Sterling slide to 1.2000 before settling. A weak US NFP could see the British currency rally further above 1.2200 and beyond. Tin helmets on in this currency pair today.

Happy Friday and US Payrolls Report Day to all. And a top weekend too.

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