Downbeat US job growth depresses dollar, more to come?

Summary: Jobs created in the US for August disappointed, rising just 235,000 against estimates of at least 720,000. Traders immediately sold down the already depressed US Dollar against all its Rivals. The Dollar Index, a popular gauge of the Greenback’s value against a basket of 6 major currencies, slid 0.24% to 92.12 (92.50), its lowest close since the start of August. Other components of the US Payrolls report fared better with the Unemployment rate matching forecasts at 5.2%. Wages (Average Hourly Earnings) climbed 0.6%, beating forecasts at 0.3%. The Australian Dollar outperformed, surging to a New York close at 0.7462 USD from 0.7403 on Friday, up 0.68%. It’s smaller cousin, the Kiwi (NZD/USD) climbed 0.52% to 0.7155 (0.7113). Against the Japanese Yen, the US Dollar eased 0.35% to 109.70 from 109.95. The Euro ended little changed at 1.1877 (1.1874 Friday) while Sterling edged up to 1.3860 from 1.3835. The USD/CAD pair slid 0.37% to 1.2530 (1.2550).  Treasury bond yields were higher. The key US 10-year note climbed to 1.32% from 1.29% on Friday. Germany’s 10-year Bund yield settled at -0.36% from -0.39%. Australia’s 10-year treasury yield was last at 1.22% from 1.20%. Wall Street stocks dipped. The DOW finished at 35,355 (35,448), while the S&P 500 settled at 4,532 from Friday’s opening at 4,538.
Other data released on Friday saw Australia’s July Retail Sales slide to -2.7%, underwhelming forecasts at -1.9%. China’s Caixin Services PMI for August slumped to 46.7 from 54.9, missing estimates at 52.6. Japan’s August Jibun Bank Services PMI eased to 42.9 from a previous 47.4. Euro area Markit PMIs for August were mostly lower than expected in France (56.3 vs 56.4), Italy (58.0 vs 58.5), Germany (60.8 from 61.5). The Eurozone Markit Services PMI in August fell to 59.0, missing forecasts at 59.7 and a previous 59.7. Eurozone July Retail Sales fell (m/m to -2.3% from +1.8% and estimates at +0.1%); (y/y to 3.1% from 5.4% and estimates at 4.8%). US August Markit Services PMI eased to 55.1 from a previous 55.2 and estimates at 55.2. US August ISM Services PMIs beat estimates at 61.7 versus 61.5.

AUD/USD – The Australian Dollar soared to an overnight and mid-July peak at 0.7478 before easing in late New York to settle at 0.7460. On Friday, the AUD/USD pair opened at 0.7403. Broad based US Dollar weakness and the market’s elevated risk appetite has boosted the impressive Aussie over 4% in over 2 weeks.

NZD/USD – the other antipodean currency rallied 0.52% to a New York close at 0.7155 from its opening at 0.7113. The Kiwi, otherwise known as the “Flightless Bird” to many currency traders, has also outperformed like its bigger antipodean cousin, the Aussie. Overnight high traded was at 0.7170, also the peak since mid-June.

EUR/USD – the shared currency was little changed at 1.1877 from 1.1874 on Friday. Overnight high traded for the EUR/USD pair was at 1.1909. European and Eurozone Services PMIs mostly disappointed expectations on Friday which weighed on the Euro.

USD/JPY – The Greenback slid against the Japanese Yen to 109.70 from 109.95. Despite a rise in US bond yields, broad-based Dollar weakness weighed on the USD/JPY pair. Japan’s Jibun Bank Services PMI in August slid to 42.9 from 47.4 in July, which weighed on the Yen.

On the Lookout: With the US and Canada celebrating their Labour Day holiday today, the economic calendar is light. Australia starts off with its ANZ August Job Advertisements report (no forecasts given, previous was -0.5%). Next is Australian TD Securities Inflation for August (m/m f/c 0.5% from 0.4%). Europe kicks off with Germany’s July Factory Orders (m/m f/c -1.0% from 4.1% - ACY Finlogix). German August Construction PMI (no f/c, previous was 47.1 – FX Street). Eurozone August Construction PMI follows (no f/c, previous was 49.8 – ACY Finlogix). Eurozone Construction PMI for August follows (no f/c previous was 49.8). UK is next with its August Construction PMI (f/c 56.9 from 58.7 – ACY Finlogix). The Eurozone Sentix Investor Confidence Index for September rounds up the day’s data releases (f/c 19.7 from previous 22.2 – FX Street). The Eurozone Economic Finance Ministers Meeting is also scheduled for today. Event highlights for the week starts off with tomorrow’s RBA interest rate policy meeting. The Australian central bank is not expected to defer any bond tapering given the worsening outbreak of the Delta variant. The week ahead also sees the Bank of Canada and European Central Bank policy meetings (Thursday).

Trading Perspective: US Federal Reserve President Jerome Powell told his audience at the Jackson Hole summit last week that while the Fed had arrived at the point where substantial progress had been made on inflation, it needed much ground to cover to reach “maximum employment.” Friday’s US NFP report was less than satisfactory. The US Dollar extended its fall versus all Rivals. While the Greenback opens with an offered feel, it looks overdone in the short term.

USD/DXY – The Dollar Index slumped to 91.95 overnight, a low which hasn’t been seen since August 13. The Greenback rallied back above the 92.00 level, setting at 92.12 in New York. Immediate support lies at 91.95 followed by 91.80 (late June lows). Immediate resistance can be found at 92.30 (overnight high traded was 92.26) and 92.60. Looks overdone and would buy the dips to 92.00, with a stop under 91.75, looking for a bounce to 92.60/70.

AUD/USD – The Aussie Battler has had a true battler comeback, rising a further 0.68% to finish at 0.7462 (0.7403 Friday morning). AUD/USD traded to an overnight and mid-July high at 0.7478. A little over two weeks ago, the Aussie hit a low at 0.7106, with a finish at 0.7137 (August 23). The Aussie’s rise has been impressive, buoyed by an improvement in risk sentiment. Tomorrow sees the RBA policy meeting where the Australian central bank is not expected to defer any bond tapering. The surge in the Delta variant which began in mid- June New South Wales has accelerated. Medical experts forecast that the peak is yet to come. This will slim any chances of a rapid economic rebound and weigh on the Aussie. AUD/USD has immediate resistance at 0.7480 followed by 0.7510. Immediate support lies at 0.7425 followed by 0.7390 and 0.7360. The Aussie’s up-move is overdone and am looking to sell near 0.7470 with a stop above 0.75 cents.

EUR/USD – The Euro finished little changed at 1.1877 from 1.1874 on Friday. EUR/USD traded to an overnight high at 1.1909. Disappointing Euro area and Eurozone Services PMIs and a drop in Eurozone July Retail Sales prevented the shared currency from much ground against the Greenback. The overnight low for the EUR/USD pair was at 1.1866. Today sees the release of German Factory Orders (July) and Construction PMI (August). The latest CFTC COT (CFTC Commitment of Traders) report saw a large paring of long speculative Euro bets to +EUR 10,500 contracts from +EUR 24,600 contracts the previous week. Immediate resistance for the Euro lies at 1.1910 and 1.1940. Immediate support can be found at 1.1860 (overnight low 1.1866) followed by 1.1830. Look for consolidation in a likely range today between 1.1835-1.1905. Just trade the range shag on this one today.

USD/CAD – against the Canadian Loonie, the Greenback eased to 1.2530 New York close from a 1.2550 open on Friday. USD/CAD traded to an overnight peak at 1.2589. The overnight low was at 1.2493. Lower oil prices prevented the Canadian currency from appreciating further against the US Dollar. On Friday WTI Oil prices slid further, closing 1.21% lower to USD 69.15 (USD 69.77). Immediate support for the USD/CAD can be found at 1.2500 followed by 1.2470. Immediate resistance can be found at 1.2550, 1.2585 and 1.2615. Look for Asia to trade a likely range today of 1.2510-1.2580 today. Prefer to buy dips to 1.2510, with a stop under 1.2490.