DXY climbs post FOMC, JPY tumbles, EUR outperforms

AUD falls; Bond Yields surge; Next – Friday US Payrolls

Summary:

The Dollar Index, a popular gauge of the Greenback’s value against a basket of 6 major currencies, edged higher to 102.40 from 102.20 previously.

Private Businesses from the U.S. (ADP) hired 164K workers, higher than economist’s forecasts of 120K. U.S. Claims for Unemployment Benefits were also better, down to 202K from 220K previously.

Against the Japanese Yen (USD/JPY) the US Dollar rocketed to 144.60, up 1.12% from 141.95 previously. The Greenback finished at its highest level against the Yen in nearly two weeks.

The Australian Dollar (AUD/USD) tumbled to 0.6700 from 0.6762 after Australia’s Judo Bank Manufacturing PMI dropped to 47.6 from 47.7 previously. It was the third consecutive drop below 50, which points to a whole quarter of contraction in services activity.

The Euro (EUR/USD) edged higher against the trend, finishing at 1.0945 (1.0925). Eurozone Final Services PMI rose to 48.8 from 48.1 previously, beating expectations at 48.1. Euro cross pairs rose.

Sterling (GBP/USD) advanced modestly to 1.2677 from 1.2660 after UK Services PMIs beat estimates, climbing to 53.4 against 52.7. The GBP/USD pair steadied after being pounded for most of the week.

The Greenback finished mixed against the Asian and Emerging Market currencies. The USD/SGD pair closed at 1.3295 against 1.3270 previously. USD/CNH (Dollar-Offshore Chinese Yuan) rallied to 7.1780 from 7.1560. Against the Thai Baht, the Dollar (USD/THB) edged higher to 34.53 from 34.30.

The US 10-year bond yield surged to 3.99% (3.94% previously) while the 2-year US treasury rate rose to 4.38% from 4.33%. Germany’s 10-year Bund yield soared 9 basis points to 3.72%.

Wall Street stocks steadied. The DOW was last at 37,580 (37,630) while the S&P 500 dipped to 4,707 from 4,727. Japan’s Nikkei 225 Index climbed to 33,380 (33,220).

Other data released saw China’s Caixin Services PMI climb to 52.9 from 51.5 previously, beating median forecasts at 51.6. UK Net Lending to Individuals rose to GBP 2 billion from GBP 1.3 billion.

• USD/JPY – The Dollar Yen pair had another volatile session in less liquid trade, ratcheting up to finish at 144.60 from 141.95 on Wednesday. The overnight low traded for the USD/JPY pair was at 142.85. Japan’s 10-year JGB yield was unchanged at 0.60% highlighting the yield gap with the US 10-year rate.
• EUR/USD – The shared currency outperformed, climbing against the Greenback to 1.0945 from 1.0925. The Euro soared to an overnight high at 1.0972 while the overnight low traded was 1.0916. A robust Eurozone Services PMI lifted the Euro against the Greenback as well as other peers. The EUR/JPY pair surged 1.2% to 158.25 (156.00).
• AUD/USD – The Aussie Battler slid 0.53% to 0.6700 from 0.6762 previously. A fall in the Judo Bank’s Manufacturing PMI weighed on the Australian Dollar. The Aussie traded to a low at 0.6697 while the overnight high recorded was at 0.6760.
• GBP/USD – Sterling edged higher against the US Dollar to 1.2677 from 1.2660. In choppy trade, the British currency was pounded to an overnight low at 1.2657 before steadying. The overnight high recorded for the GBP/USD pair was at 1.2730.

On the lookout:

It’s Friday US Payrolls Day so we can expect more choppy trading as we approach the finish of the first week in 2024.

Prior to the US Employment data, Japan kicks off today’s economic calendar with its Consumer Confidence Index for December (f/c 36 from 36.1 previously – ACY Finlogix).

Japan also releases its Jibun Bank’s December Services PMI (f/c 52 from 50.8 – ACY Finlogix).

Germany starts off Europe with its November Retail Sales (m/m f/c -0.1% from 1.1%; y/y f/c -0.5% from -0.1% - ACY Finlogix).

The UK follows with its Halifax December House Price Index (m/m f/c -0.1% from 0.5%; y/y f/c -0.4% from -1.0% - ACY Finlogix).

Watch this number, the expectations are far from the previous report. Up next is the Eurozone December Construction PMI (f/c 38 from 36.2 – ACY Finlogix), UK S&P December Global Construction PMI (f/c 46 from 45.5 – ACY Finlogix).

The Eurozone releases its Flash December Inflation Rate (m/m f/c 0.1% from -0.6%; y/y f/c 3% from 2.4% previously – ACY Finlogix), Eurozone Flash December Core Inflation Rate (y/y f/c 3.5% from 3.6% - ACY Finlogix).

Eurozone November PPI follows (m/m f/c -0.1% from 0.2%; y/y f/c -8.7% from -9.4% - ACY Finlogix).

Canada starts off North America with its Canadian December Unemployment Rate (f/c 5.9% from 5.8% - ACY Finlogix), Canadian December Employment Change (f/c 13.5K from 24.9K previously – ACY Finlogix), Canadian December Average Hourly Wages (y/y f/c 5.1% from 5% - ACY Finlogix).

The US rounds up today’s busy economic calendar with its US December Average Hourly Earnings – or Wages (m/m f/c 0.3% from 0.4%; y/y f/c 3.9% from 4.0% - ACY Finlogix), US December Unemployment Rate (f/c 3.8% from 3.7% - ACY Finlogix) and US December Non-Farms Payrolls (f/c 170K from 199K – ACY Finlogix).

Canada releases its December Ivey PMI (f/c 52.4 from 54.7 – ACY Finlogix).

The US releases its December ISM Services PMI (f/c 52.6 from 52.7 – ACY Finlogix) and November US Factory Orders (m/m f/c 2.1% from -3.6% - ACY Finlogix).

Whew! A busy economic calendar event day which culminates with the US Payrolls report.

Trading perspective:

The rise in US bond yields was mostly supportive for the Greenback, which finished mixed against various Rivals.

Against the yield sensitive Japanese Yen, the US currency ratcheted 1.12% higher to 144.60 (141.95).

Today, though it’s all about the US December Payrolls report. Forecasts for the NFP number are for a drop to 170,000 from 199,000 previously.

A number lower than 170,000, say 150,000 or lower, will see the Dollar sold aggressively across the board.

A number higher than 200,000 would see the Greenback rocket higher. Watch the Unemployment Rate as well, forecasts at for a rise to 3.8% from 3.7%. If the US Jobless Rate hits 4%, it’s sayonara for the Greenback.

An Unemployment rate of below 3.7%, say 3.5% would put a rocket under the US Dollar. It’s Friday, US Payrolls. “Let’s get ready to rumble.”

• EUR/USD – The shared currency gained versus the Greenback to 1.0945 from 1.0925. Look for immediate resistance today at 1.0975 (overnight high traded was 1.0972). The next resistance level is found at 1.1000 followed by 1.1035. On the downside, look for immediate support at 1.0910 followed by 1.0880 and 1.0850. Expect a choppy session for the Euro today, likely between 1.0900-1.1000 first up.
• USD/JPY – Against the Japanese currency, the US Dollar rocketed to 144.60 from 141.95. Immediate resistance today lies at 144.85 (overnight high). The next resistance level is found at 145.15 followed by 145.45. On the downside look for immediate support at 144.20, 143.80 and 143.50. Look for more volatility in this currency pair today. Likely range: 143.00-145.00. Trade the range, nice and wide.

Source: Finlogix.com

• AUD/USD – The Aussie Battler was hammered lower to 0.6700 from 0.6762 previously. Look for immediate support at 0.6690 followed by 0.6660. The overnight low traded was at 0.6697. Immediate resistance can be found at 0.6730 followed by 0.6760 and 0.6790. Look for more choppy trade in the Aussie, likely between 0.6670-0.6800. Prefer to sell rallies.
• GBP/USD – Sterling rose modestly against the US Dollar, finishing at 1.2677 against 1.2660. On the day, look for immediate support at 1.2650 (overnight low traded was 1.2657). The next support level lies at 1.2620. Immediate resistance can be found at 1.2705 followed by 1.2735 (overnight high traded was 1.2730). Look for Sterling to trade a likely range today between 1.2650-1.2750. Trade the range.

Happy Payrolls Friday and trading all. A top weekend ahead.