Dollar Eases, US Jobless Claims Higher Than Expected

Bond Yields Dip, US NFP Forecast at 180K from 216K

Summary:

After initially climbing on comments from Fed Chair Jerome Powell which ruled out a rate cut in March, the Dollar Index (DXY) eased to 103.00 from 103.50.

Claims for Unemployment Benefits in the US rose to 224,000, up from 214,000 previously, and higher than forecasts at 212,000. The US 10-year bond yield eased 4 basis points to 3.87%.

Market participants expect the Non-Farms Payrolls to show that the US created between 180,000-187,000 jobs in January from December’s 216,000. The Unemployment Rate is expected to tick up to 3.8% from 3.7%.

Average Hourly Earnings (Wages) are forecast to ease to 0.3% from 0.4%. Other data released overnight saw US ISM Manufacturing PMI climb to 49.1 from 47.4 previously.

The Euro (EUR/USD) rallied to 1.0870 from 1.0810 boosted by the softer Greenback. The Eurozone Flash CPI climbed to an annual 3.3%, higher than estimates of 3.2%.

Sterling (GBP/USD) rallied to 1.2747 from 1.2677 after the Bank of England held rates steady, and unchanged at 5.25%. The BOE also signaled that the tightening cycle most likely ended.

Against the Japanese Yen, the US Dollar (USD/JPY) slid to 146.30 from 146.90. The USD/JPY pair tumbled to an overnight low at 145.89 weighed by a fall in US bond yields.

The Australian Dollar (AUD/USD) steadied to finish at 0.6570, little-changed from yesterday’s 0.6562. Australia’s Quarterly NAB Business Confidence tumbled to -6 from -1 previously.

The Dollar finished lower against the Asian and Emerging Market Currencies. USD/CNH settled at 7.1855 from 7.1890. Against the Thai Baht (USD/THB), the Greenback eased to 35.30 (35.55).

Wall Street stocks lifted on the weaker Dollar and lower treasury yields. The DOW climbed 0.8% to 38,477 from 38,147 yesterday. The S&P 500 rallied to 4,897 from 4,847.

Other economic data released yesterday saw China’s January Caixin Manufacturing PMI print at 50.8, unchanged from the previous month, but higher than expectations of 50.6.

• EUR/USD – In another choppy session, the Euro initially plummeted to its overnight low at 1.0780 before steadying and rallying to 1.0870 in late New York. The shared currency soared to an overnight peak at 1.0875.
• AUD/USD – The Aussie Battler rebounded to finish at 0.6570, modestly up from yesterday’s close at 0.6562. The Australian Dollar was pummeled lower to 0.6508, its overnight low before steadying. The Aussie Battler saw an overnight peak at 0.6579.
• USD/JPY – Against the Japanese Yen, the Greenback eased to 146.30 from 146.90 yesterday. The USD/JPY pair saw an overnight low at 145.89 as US bond yields tumbled. In volatile trade, the USD/JPY pair soared to an overnight high at 147.11 before easing.
• GBP/USD – Sterling soared against the broadly based weaker US Dollar to 1.2747, up from yesterday’s open at 1.2677. The British currency was supported against the Greenback despite the Bank of England signaling that its tightening cycle most likely ended.

On the Lookout:

Welcome to Friday US Payrolls Day. Expect the markets to consolidate around current levels in anticipation of the Non-Farms Payrolls report (forecasts above).

Prior to that, other economic data releases kick off with New Zealand’s December Building Consents (m/m f/c 6.2% from -10.6% - ACY Finlogix).

Australia follows with its PPI report (q/q f/c 0.6% from 1.8%; y/y f/c 3.7% from 3.8% - ACY Finlogix), Australian December Home Loans (m/m f/c 1.5% from 0.5% - ACY Finlogix), and finally Australian December Investment Lending for Homes (f/c 2.9% from 1.9% - ACY Finlogix).

France starts off European data with its December Industrial Production (f/c 0.2% from 0.5% - ACY Finlogix). Switzerland follows with its Consumer Confidence (f/c -28 from -40 – ACY Finlogix).

The US starts off North America with its Average Hourly Earnings (y/y f/c 4.1% from 4.1% - ACY Finlogix). Other US Payrolls forecasts are above.

The US University of Michigan Final Consumer Sentiment for January is forecast at 78.9 from 69.7 previously – ACY Finlogix.

Finally, the US December Factory Orders (m/m f/c 0.2% from 2.6% - ACY Finlogix) rounds up today’s economic forecasts.

Trading Perspective:

It all comes down to today’s Non-Farms Payrolls report for January. The NFP change is forecast between 180,000 and 187,000, down from 216,000 previously.

If the NFP change comes in lower than 180,000, we can expect a steep Dollar drop as traders liquidate any Dollar longs while initiating shorts.

If the forecast in Payrolls climbs above 190,000, up to 210,000, expect the Greenback to soar like an eagle.

Heading into the Payrolls number, it’s all fun and games, resulting in high volatility. It’s Friday, US Payrolls Day. Tin helmets on.

• EUR/USD – The Euro benefitted from broad-based US Dollar weakness soaring 0.6% to 1.0870 New York close. Look for immediate resistance today at 1.0880 (overnight high traded was 1.0875). The next resistance level lies at 1.0910. A break above 1.0910 could see 1.0950 and higher. Immediate support is found at 1.0850, 1.0820 and 1.0780 (overnight low traded was 1.0780). Expect choppy trade, likely between 1.0750-1.0920.
• AUD/USD – The Australian Dollar sold modestly lower to 0.6570 in late New York, from its overnight high at 0.6579. Look for immediate resistance at 0.6580 followed by 0.6610 and 0.6640. Immediate support can be found at 0.6530, 0.6500 and 0.6470. Look for more volatility in the Aussie, with the likely trading range between 0.6510-0.6610 today.

(Source: Finlogix.com)

• USD/JPY – Against the Japanese Yen, the Greenback slid to 146.30 from 146.90 yesterday. The lower close in US treasury yields weighed on the USD/JPY pair. Today look for immediate support at 145.90 (overnight low traded was 145.89). The next support level is found at 145.60. Immediate resistance lies at 146.55, 146.85 and 147.15. Look for more choppy trade in this currency pair, likely between 145.80-147.30.
• GBP/USD – Sterling rallied against the broadly based weaker US Dollar to 1.2747, up from yesterday’s 1.2677. Look for immediate resistance at 1.2760 (overnight high traded was 1.2756). The next resistance level lies at 1.2790 followed by 1.2820. Immediate support can be found at 1.2620 (overnight low traded was 1.2625). The next support level lies at 1.2590. Look to trade a likely range in Sterling, between 1.2620-1.2770.

Happy Friday and Payrolls Day. A top weekend to all.

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