Strong US Payrolls Lift Dollar; AUD Dips, CAD Tumbles

USD/JPY Extends Gains, Euro Flat, Bond Yields Climb 

Summary:

A robust US Payrolls gain of 303K that beat forecasts of 212K, boosted the Greenback, with analysts now expecting a delay in rate cuts. It was the largest increase in jobs creation in 10 months.

Furthermore, the US Unemployment Rate eased from 3.9%, a 2-year high, to 3.8%. Average Hourly Earnings (Wages) climbed 0.3%, up from 0.1% previously. 

US Bond Yields soared, with the 10-year rate settling at 4.40% from 4.31%. The 2-year treasury yield closed at 4.75% (4.64%). Other global bond rates rose, but to a lesser extent than that of the US.

The Dollar Index (USD/DXY), which weighs the value of the Greenback against a basket of 6 major currencies, lifted to 104.00, up from Friday’s open at 103.90.

Against the Japanese Yen, the US Dollar extended its gains, settling at 151.65 from 151.23. In choppy trade, the USD/JPY pair tumbled initially to 150.81 before rallying after the release of the US jobs report. 

Earlier in the day on Friday, Japanese authorities ramped up intervention rhetoric to stem any sharp declines in the Yen. Japan’s 10-year JGB yield finished unchanged, at 0.75%. 

The Greenback soared against the Canadian Loonie (USD/CAD) to 1.3595 from 1.3955. In volatile overnight trade, the USD/CAD pair jumped to a near 5-month high at 1.3647. 

In stark contrast to an improvement in the US Unemployment rate, Canada’s March Jobless Rate jumped to 6.1% from 5.8% previously, beating expectations at 5.9%. 

The Australian Dollar (AUD/USD) dipped to 0.6577 at the New York close, modestly lower from Friday’s opening at 0.6585. New Zealand’s Kiwi (NZD/USD) slid to 0.6005 from 0.6015. 

Sterling was little changed, closing at 1.2630 in late New York (1.2635 Friday). Despite a fall in the Eurozone’s March Retail Sales, the Euro (EUR/USD) closed at 1.0835 from 1.0838 Friday. 

Sterling eased to 1.2640 from 1.2655 Friday. The UK Halifax March House Price Index slid to -1% from 0.4% previously, lower than estimates at 0.1%. The GBP/USD pair was pounded to an overnight low at 1.2574 before settling. 

Against the Asian and Emerging Market Currencies, the US Dollar finished mixed. The USD/CNH (Dollar-Offshore Chinese Yuan) was last at 7.2485 from 7.2515. The USD/SGD (Dollar-Singapore Dollar was unchanged at 1.3485. 

Other economic data released Friday saw Australia’s Goods Trade Surplus ease to +AUD 7.28 billion from +AUD 11.03 billion previously. Japan’s Leading Indicators rose to 111.8 from 109.5.

• AUD/USD – the Aussie Battler slid against the overall stronger Greenback to 0.6577 in late New York, modestly lower from Friday’s opening at 0.6585. The Aussie Dollar traded to an overnight high at 0.6592 while the overnight low recorded was at 0.6549.
• USD/CAD – against the Canadian Loonie, the US Dollar climbed to finish at 1.3595 from 1.3555 Friday. In choppy trade, the USD/CAD pair saw an overnight and near 5-month peak at 1.3647 before sliding to the New York close. Canada’s weak jobs report contrasted with that of the US. 
• USD/JPY – the Dollar extended its gains, climbing against the Japanese Yen to 151.65 from Friday’s open at 151.25. In another choppy trading session, the USD/JPY pair saw an overnight low at 150.81 before settling. Japanese authorities continued their verbal rhetoric to stem any sharp declines in the Yen.
• EUR/USD – the Euro finished little changed, at 1.0835 from 1.0838. The shared currency traded to an overnight high at 1.0848 before easing. Earlier, the EUR/USD pair tumbled to an overnight low at 1.0791. 

On the Lookout: 

Today’s economic calendar is a light one and kicks off with Japan’s February Current Account (surplus f/c +JPY 3112.5 billion from +JPY 438.2 billion – ACY Finlogix). Australia follows with its February Home Loans (m/m f/c 2.25% from -4.6% - ACY Finlogix). Japan releases its March Economy Watchers Survey Outcome (f/c 52.9 from 53.0 – ACY Finlogix). 

Switzerland starts off European data with its Swiss March Unemployment Rate (f/c 2.6% from 2.4% - ACY Finlogix). Germany releases its February Trade Balance (Surplus m/m f/c +EUR 25.5 billion from +EUR 25.5 billion – ACY Finlogix), German March Industrial Production (m/m f/c 0.3% from 1.0% - ACY Finlogix). Finally, the US releases its March Consumer Inflation Expectations (m/m f/c 2.9% from 3.0% - ACY Finlogix). 

Trading Perspective: 

Following the robust US Payrolls report, analysts now expect a delay in the Federal Reserve rate cuts. Federal Reserve officials led by Fed Chair Jerome Powell have said that the Fed would require additional evidence of inflation stabilizing around the 2% target, before adjusting interest rates. US March Headline and Core CPI data are released later this week, on Wednesday. 

US Treasury Bond yields rose, with the benchmark 10-year rate settling at 4.40% (4.31% Friday). Other global yields rose but to a lesser degree than that of US rates.

Economic data releases scheduled for this week should provide a clearer picture of US inflation. Which will impact the Dollar and bond yields. Meanwhile, expect the Dollar to stay bid in Asia and maintain its strength, following its New York close.

• AUD/USD – The Aussie Battler slid modestly against the Greenback to finish at 0.6577 from 0.6585. Look for immediate support in the AUD/USD pair at 0.6550 (overnight low traded was 0.6549). The next support level lies at 0.6520. On the topside, look for immediate resistance at 0.6600 and 0.6630. Look for the Aussie to consolidate in a likely range today of 0.6520-0.6620. Trade the range, with the preference to buy AUD on dips.
• USD/JPY – against the Japanese Yen, the Greenback maintained its bid, settling at 151.65, up from Friday’s opening at 151.23. On the day, look for immediate resistance at 152.00 followed by 152.30. Immediate support can be found at 151.30, 151.00 and 150.70 (overnight low traded was 150.81). Look for more choppy trade, likely between 150.80-151.80. Prefer to sell USD/JPY rallies. Watch for more rhetoric from Japan Inc.
• EUR/USD – the Euro continued to trade steady against the US Dollar, settling at 1.0835 (1.0838 Friday). Look for immediate resistance at 1.0865 and 1.0895 today. Immediate support can be found at 1.0800 followed by 1.0770 and 1.0740. Look for the Euro to trade a likely range today of 1.0770-1.0870. Prefer to sell Euro rallies today.
• USD/CAD – We focus on the USD/CAD today because of the contrasting results in Employment in the two countries. The Canadian Loonie was the weakest major currency against the Greenback following its anemic employment report. The USD/CAD closed at 1.3595. Immediate support lies at 1.3565 followed by 1.3525 and 1.3495. Immediate resistance lies at 1.3620 and 1.3650 (overnight high traded was 1.3647). Look for more choppy trade in this currency pair, likely between 1.3570-1.3670. Trade the range, nice and wide.

Have a good trading week ahead all. Happy Monday. 

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