Dollar drops on soft Payrolls, Aussie, Kiwi soar

US bond yields slump, Fed easing bias picks up

Summary

The Dollar Index (DXY), which weighs the value of the Greenback against a basket of 6 major currencies dropped below 105 to 104.74 after a soft April US Payrolls report.

April US Non-Farms Payrolls fell to 167K from 303K in March, and lower than median forecasts at 243K. The Unemployment Rate rose to 3.9% from 3.8% previously. Monthly Wages in April (Average Hourly Earnings) eased to 0.2% from 0.3%.

The US 10-Year bond yield slumped to 4.51% from 4.58%, its lowest since November 2023. The weaker-than-expected labor report reinforced the view that the Fed will cut rates in September.

Against the Japanese Yen, the Greenback fell to 152.85 from its 153.65 open on Friday. In another choppy session, the USD/JPY pair plummeted to an overnight low at 151.86 on suspected intervention from Japanese authorities.

The Aussie Dollar (AUD/USD) soared to finish at 0.6620 from 0.6565 Friday, outperforming its FX peers. The Aussie Battler traded to 0.6648 overnight, highs not seen since early March.

Sterling (GBP/USD) edged higher, finishing at 1.2550 from 1.2535 Friday. The British Pound rose to an overnight high at 1.2635 before easing. The EUR/USD rallied to 1.0762 (1.0725 Friday).

The Greenback finished lower against the Asian and Emerging Market Currencies. USD/CNH (Dollar-Offshore Chinese Yuan) slid to 7.1950 (7.2070). The USD/SGD pair (Dollar-Singapore Dollar) eased to 1.3510 from 1.3550. USD/THB (Dollar-Thai Baht) closed at 36.72 (36.85).

Global stocks rose. The DOW climbed to 38,710 from 38,470. The S&P 500 soared to 5,135 (5,085). Japan’s Nikkei rose to 38,358 (37,985) while Australia’s ASX 200 rallied to 7,657 (7,625).

Other data released Friday saw Italy’s Unemployment Rate improve to 7.2% from 7.5% (March).
UK April Services PMI rose to 54.1 from 53.1 previously, but lower than estimates at 54.9.

AUD/USD – The Aussie Battler soared against the Greenback above 0.66 cents to finish at 0.6613, up from its opening at 0.6565. The Australian Dollar outperformed, soaring to an overnight high at 0.6648 before easing. Markets will be watching the RBA’s interest rate decision tomorrow.

USD/JPY – In another roller coaster session, the Greenback plummeted to an overnight low at 151.86 against its opening at 153.65, which was also the overnight high. The USD/JPY pair closed at 152.90 in New York.

GBP/USD – Sterling gained modestly against the against the Greenback, finishing at 1.2550, modestly higher than its opening at 1.2535. The British Pound traded to an overnight high at 1.2635. The overnight low recorded for the GBP/USD pair was 1.2529.

EUR/USD – The shared currency advanced modestly versus the US Dollar to 1.0762 from Friday’s open at 1.0758. The Euro soared to an overnight high at 1.0812 before easing. The overnight low recorded for the EU/R/USD pair was 1.0724.

On the lookout

The week ahead kicks off with public holidays in Japan (Children’s Day) and the UK (Labor Day) today. Australia releases its ANZ Bank Job Advertisements (m/m f/c 1.1% from -1% previously – ACY Finlogix). China releases its Caixin April Services PMI (f/c 52.5 from 52.7 – ACY Finlogix). Italy kicks off Europe with its Italian April Services PMI (f/c 54.7 from 54.6 – ACY Finlogix). France releases its April Services PMI (f/c 50.5 from 48.3 – ACY Finlogix). Germany is next with its April Services PMI (f/c 53.3 from 50.1 – ACY Finlogix), and the Eurozone releases its Eurozone April Services PMI (f/c 52.9 from 51.5 – ACY Finlogix). Next up is the Eurozone PPI (m/m f/c -0.7% from -1%; y/y f/c -7.8% from -8.3% - ACY Finlogix) and the Eurozone Sentix Investor Confidence Index (f/c -4.8 from -5.9 – Forex Factory).

Central bank heads scheduled to speak at Swiss National Bank Chairman Thomas Jordan (10.25 pm in Basel, Switzerland), German Bundesbank President Joachim Nagel (9.30 pm in Basel, Switzerland) as well as Fed FOMC members Barkin (2.50 am, 7 May in South Carolina) and Williams (3 am, 7 May in Beverly Hills, California). All times given are for Australia.

Trading perspective

The Dollar extended losses from last week due to a soft US Payrolls report. After sticking to a dovish tone in their FOMC meeting, the Federal Reserve’s easing bias has accelerated. Interest rate markets are fully discounting a Fed rate cut in September of 25 basis points. Which is followed by another 25 bps by the end of the year. Bond yields fell with the 10-year down to 4.51%, its lowest since November 2023. This will continue to weigh heavily on the Greenback against all its peers.

AUD/USD – The Aussie Dollar keeps it bid against the Greenback ahead of tomorrow’s RBA meeting to discuss interest rates. The Battler closed at 0.6613 in New York. Look for immediate resistance today at 0.6650 (overnight high traded was 0.6648). The next resistance level lies at 0.6680. Immediate support can be found at 0.6590 followed by 0.6560. Look for consolidation today between 0.6570-0.6670. Prefer to sell the Aussie on strength today, ideally around 0.6670.

USD/JPY – The fall in the US 10-year bond yield by 7 basis points to 4.51% weighed on the Dollar-Yen pair. Immediate support today can be found at 152.50, 152.20 and 151.90. Immediate resistance lies at 153.20, 153.50 (overnight high traded was 153.42) and 153.80. Look for USD/JPY to consolidate in a likely range today of 151.70-153.20. Trade the range, nice and wide.

EUR/USD – The shared currency edged marginally higher against the US Dollar to 1.0762, up from 1.0725 Friday. Immediate resistance today lies at 1.0790, followed by 1.0820 (overnight high traded was 1.0812). The next resistance level is 1.0850. Immediate support is found at 1.0720 followed by 1.0690. Look for the Euro to consolidate in a likely range of 1.0720-1.0820 today. Preference is to sell Euro rallies.

GBP/USD – Sterling climbed to finish at 1.2550, up from its opening at 1.2535 Friday. On the day, look for immediate resistance at 1.2580 followed by 1.2610 and 1.2640 (overnight high traded was 1.2635). Immediate support can be found at 1.2520 and 1.2490. Look for the British Pound to consolidate in a likely trading range today of 1.2530-1.2630. Trade the range, nice and wide.