DXY tumbles on weak US NFP, JPY soars to 26-week

Bond yields, stocks slump - risk-off; recession fears grow

Summary:

The US economy created an anemic number of Jobs in July of 114K, way below 206K in June, as well as estimates of 175K. The Unemployment Rate climbed to 4.3% from 4.1%.

Risk aversion rose from the weak Payrolls report, weighing on the Greenback and global stocks. The Dollar Index, which weighs the value of the US currency against a basket of 6 major currencies, tumbled to 103.22 from 104.35 Friday.

Global bond yields and stocks slumped. The 10-Year US treasury yield lost 19 basis points to 3.79% from Friday’s open of 3.98%. Two-year US rates plunged a whopping 27 bps to 3.88%.

The DOW finished in New York at 39,630 from 40,230, while the S&P 500 lost 1.27% to 5,335 from 5,437. Fears of a slowing US economy saw markets anticipating a more aggressive pace of Fed easing. The broad asset selloff saw Bitcoin fall around 5.1%.

The Japanese Yen soared to a 26-week high against the US Dollar, settling at 146.57 against 149.60 Friday. Against the haven Swiss Franc, the Dollar plummeted to 0.8575 from 0.8735.

The Euro (EUR/USD) soared to 1.0925 from 1.0887 while Sterling (GBP/USD) rebounded to 1.2812 from Friday’s opening at 1.2735. Traders continued to digest the Bank of England’s 0.25% interest rate cut last week.

The Aussie Dollar (AUD/USD) rebounded to 0.6512 from 0.6495 Friday while New Zealand’s Kiwi (NZD/USD) gained modestly to 0.5970 (0.5950). The Aussie’s topside was limited following increasing expectations of an RBA rate cut by year-end.

Against the Asian and Emerging Market Currencies, the Greenback finished lower. The USD/CNH (Dollar-Offshore Chinese Yuan) slid to close at 7.1600 (7.2500).

The USD/SGD pair (US Dollar-Singapore Dollar) fell to 1.3260 from 1.3370 Friday. Against the Thai Baht, the US Dollar (USD/THB) slid to 35.33 from 35.65 Friday.

Other economic data released Friday saw US Average Hourly Earnings (Wages) fall to -0.2% against estimates of 0.3%, which was the previous number. US Factory Orders slid to -3.3% from -0.5% previously, and lower than expectations of -2.7%.

• USD/JPY – The Dollar extended its slide against the Japanese Yen, plunging to 146.57 in late New York against Friday’s opening at 149.60. In another choppy trading session, the USD/JPY pair traded to an overnight high at 149.71 while the low recorded was 146.35.
• EUR/USD – the shared currency advanced against the broadly-based weaker Greenback to 1.0925 from 1.0887 Friday. The Euro climbed to an overnight peak at 1.0927 before easing. The overnight low recorded for the EUR/USD pair was at 1.0782.
• AUD/USD – The Aussie Battler failed to gain a big advantage versus the Greenback settling at 0.6512 from 0.6495. The AUD/USD pair traded to an overnight high at 0.6548 while the overnight low recorded was at 0.6495.
• GBP/USD – Sterling soared against the US Dollar to 1.2840 overnight high before easing to settle at 1.2812, up from Friday’s open at 1.2735. On Thursday, the Bank of England cut interest rates by 0.25% which initially weighed on the British currency.

On the lookout:

This week’s economic calendar kicks off with Australia’s Judo Bank July Final Services PMI (f/c 50.8 from 51.2 previously – ACY Finlogix). The Bank of Japan releases its monetary policy meeting minutes (9.50 am Sydney time). Japan releases its Jibun Bank Services Final July Services PMI (f/c 53.9 from 49.4 – ACY Finlogix).

China follows with its July Caixin Services PMI (f/c 51.4 from 51.2 – ACY Finlogix). Italy kicks off Europe with its Italian July Services PMI (f/c 53 from 53.7 – ACY Finlogix), this is followed by France’s July HCOB Final Services PMI (f/c 50.7 from 49.6 – ACY Finlogix), Germany releases its July HCOB Final Services PMI (f/c 52 from 53.1 – ACY Finlogix), the Eurozone follows with its July HCOB Final Services PMI (f/c 51.9 from 52.8 – ACY Finlogix), next up is the UK’s July S&P Global Services PMI (f/c 52.4 from 52.1 – ACY Finlogix).

The Eurozone releases its June PPI (m/m f/c 0.3% from -0.2%; y/y f/c -3.3% from -4.2% - ACY Finlogix). The US rounds up today’s data releases with its S&P Final Global Services PMI (f/c 56 from 55.3 – ACY Finlogix).

Trading perspective:

The anemic US Payrolls report increased fears of a slowing US economy which may be on the verge of a recession. The rise in the Jobless rate to 4.3% from 4.1% heightened fears that the labor market was deteriorating, potentially making the economy vulnerable to a recession. With the Federal Reserve likely to start easing monetary policy aggressively, the Greenback will continue to slide. The Dollar Index closed at 103.20, lows not seen since March. The next support level lies at 103.00. Look for the Greenback to open lower against all its Rivals.

• USD/JPY – “What goes up, must come down, spinning wheel got to go round.” the tune from the popular 70’s group Blood Sweat and Tears rings loud today. The Greenback, which peaked at 162 in July saw an overnight low at 146.35 on Friday. Look for immediate support at 146.35 followed by 146.00 and 145.70. Immediate resistance lies at 147.00 followed by 147.50 and 148.00. Look for a choppy session first up, likely between 146.20-147.80. Look to sell USD rallies against the Japanese currency today.

• EUR/USD – The Euro rebounded to a 1.0925 finish in New York, up from Friday’s opening at 1.0887. Immediate resistance today lies at 1.0930 (overnight high traded was 1.0927). The next resistance level lies at 1.0960 followed by 1.0990. On the downside, look for immediate support at 1.0870, 1.0840 and 1.0810 today. Look for the Euro to consolidate in a likely range today between 1.0870-1.0970. Trade the range.
• AUD/USD – The Aussie Dollar rallied to close at 0.6512, up modestly from Friday’s opening at 0.6495. Look for immediate resistance today at 0.6540 (overnight high traded was 0.6548). The next resistance level is found at 0.6570. On the downside, look for immediate support at 0.6480 followed by 0.6450 and 0.6420. Look for the Aussie to trade a likely range today of 0.6470-0.6570.
• GBP/USD – Sterling advanced against the overall weaker US Dollar to 1.2812 from its 1.2735 open on Friday. Look for immediate resistance today at 1.2840 (overnight high). The next resistance level can be found at 1.2870. Immediate support can be found at 1.2770, 1.2740 and 1.2710. Look for the British Pound to trade a likely range today of 1.2730-1.2830. Trade the range today.

Happy Monday.  Have a good trading week ahead all.