Dollar rebound after good results in NFP and unemployment rate
The US Dollar spiked from 15 month lows following a solid Jobs Report which topped expectations. Markets scrambled to cover Dollar shorts as the US economy added 209,000 jobs in July against a forecast gain of 182,000. The Unemployment rate fell to 4.3 % from 4.2% in June, a 16 year low. Wages grew at 0.3% from 0.2% which was expected. The Participation rate rose to 62.9% from 62.8%.
The US Trade Deficit in July fell to -USD 43.6 billion from June’s -USD 46.4 billion, an 8 month low.
Australian Retail Sales: +0.3% (forecast +0.2%, previous +0.6%)
Germany Factory Orders: +1.0% (forecast 0.6%, previous 1.0%)
Canadian Employment Change: +10,900 jobs (forecast 13,100 jobs, previous 45,300 jobs)
Canada Unemployment Rate: 6.3% (forecast 6.5%, previous 6.5%)
EUR/USD – slumped, closing at 1.1772 (1.1872 Friday)
GBP/USD – down to end lower at 1.3042 from 1.3142 Friday.
USD/JPY – finished up at 110.67 (110.00 Friday)
AUD/USD – closed down at 0.7929 from Friday’s 0.7948.
Outlook: The solid US Jobs report boosted the Dollar and shorts scrambled to cover. The move was corrective and bound to happen. However, the overall sentiment on the Greenback remains negative. The Euro closed basically where we started last week, it’s up trend was barely dented. That said, the Dollar could be forming a significant base and the next two months should tell us.US National Economic Council Director Gary Cohn said that the US Corporate tax should be more in line with the OECD average of 24% than it’s current 35%. Cohn said he is confident a tax overhaul could be accomplished later on in the year.
Crucial US inflation numbers are out this coming Friday (11 August) in a week relatively light on first tier economic data. A few Federal Reserve officials are scheduled to speak this week. Markets will be watching for these.
Today’s economic data and events:
New Zealand Q 3 Inflation Expectations (GMT 3 am, Aug07/Local Time 1 pm, Aug7) – The previous Q2 Inflation Expectation was 1.9%
Swiss July CPI – (GMT 7.15, Aug7/Local Time 5.15 pm, Aug 7) forecast are -0.3% from the previous -0.1%
UK June Halifax House Price Index Monthly: (7.30 am, Aug 7/Local Time 5.30 pm, Aug 7) – forecasts are +0.2% from the previous -1.0%.
FOMC Member Kashkari speaks (GMT 5.25 pm, Aug7/Local Time 3.25 am/Aug 8) – Minneapolis Fed President Neel Kashkari (noted dove) speaks at a Rotary Club function in South Dakota.
Trading View: Markets will consolidate around current levels after Friday’s big move. The Dollar’s corrective move should extend itself. Technical corrections normally last at least two days.
EUR/USD – bounced off strong technical support at 1.1730 which should still hold for today. The rise in the Euro began with the Macron election win which brought about a wave of optimism. Since then Macron’s popularity rating has slumped. His support has fallen to levels lower than Donald Trumps. The improvement in the US trade deficit last month was due to a rise in exports, most probably the result of a weaker US Dollar. In Europe exporter stocks have suffered due to the strong Euro. Market sentiment remains strong for the Euro. This support may crack in the days ahead. Likely range today 1.1720-1.1790. Look to sell rallies in the Euro.
AUD/USD – The drop in the Aussie was less than other Major currencies. This was similar for the resource currencies which had already plateaued against the Dollar. AUD/USD bounced off it’s low of 0.7891 to end at 0.7928. Immediate support lies at 0.7900 and then 0.7880. There is resistance at 0.7950 and then 0.7980. Given the extreme market positioning and the recent jawboning from the RBA on the currency, the next big move is still south. Likely range today 0.7880-0.7940. Sell rallies
GBP/USD – dropped to an overnight low of 1.3023, just above the 1.3000 level. Sterling closed at 1.3043. There is good support at the 1.3020 level. Resistance can be found at 1.3080 and then at 1.3100. The latest BOE meeting results saw hawkish expectations quashed while Brexit remains uncertain. There is little support from PM May. The only thing in the Pound’s favor is the speculative positioning. Net speculative Sterling shorts increased in the latest CFTC/Reuters report. Likely range today 1.3010-1.3060.
NZD/USD – Like the Aussie, the Kiwi’s slide was less pronounced. NZD/USD fell to an overnight low of 0.7392 before bouncing to settle at 0.7414 at the close. Immediate support for the Kiwi lies at 0.7390. There is strong support at 0.7370. Resistance can be found at 0.7440/50. Likely range 0.7380-0.7440. NZD Inflation expectations are due later today. Sell Kiwi rallies.
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