USD recovers post-NFP losses

Market Brief

Friday’s jobs report showed that the US economy added 209’000 new jobs in July (vs. 230K exp. & 288K last), the unemployment rate deteriorated from 6.1% to 6.2%, while the participation rate slightly improved to 62.9% (62.8% prev). The US personal income remained unchanged (0.4%), while the spending increased from 0.2% to 0.4% over the past month. USD aggressively sold-off before the weekly closing bell, the sentiment is mixed this Monday. Despite disappointment, we still note that this is the sixth consecutive month that the NFP print is above 200K. The CFTC data shows extended USD longs and the recovery should continue given that the Fed expectations remain unchanged.

EUR/USD rallied to 1.3445 post-NFP. The sentiment remains negative, while the negative momentum loses speed. The short-term support zone stands at 1.3367/80 (July 30-31st lows), option barriers abound at 1.3450/1.3500. EUR/GBP broke above its June-July downtrend top and rallied toward its 50-dma (0.79934). The upside move signals a short-term bullish reversal, large option barriers (to expire tomorrow) are yet to be cleared between 0.79750/0.80300.

Despite post-NFP sell-off, USD/JPY consolidates gains above its 200-dma (102.21). Trend and momentum indicators are marginally bullish, with some hesitation in upside bets. Offers trail above 103.00, while short-term support is seen solid at 101.80/102.21 (region including 21/50/100 and 200 dma & Fibonacci 61.8% on Oct’13- Jan’14 rally). EUR/JPY is well bid above its 21-dma (137.53), the broad based EUR recovery suggest deeper upside correction. We see the upside limited below the descending Ichimoku cloud cover (138.66/140.09).

In Australia, the retail sales grew 0.6% in month to June (vs. -0.5% a month ago), the securities inflation slowed to 2.6% on year to July (vs. 3.0% last). AUD/USD opened the week above 0.9300, yet remained capped at 0.9333 in Sydney. We expect ranged Aussie pre-RBA verdict due on Tuesday. The RBA is expected to keep its cash rate target unchanged at 2.50%, the accompanying statement will define the short-term direction. The bias is negative due to divergent RBA/Fed bets.

NZD/USD holds ground above 0.8500 despite the fifth month of consecutive fall in commodity prices. According to ANZ, the milk powder prices dropped 12% in month to June, 53% y/y (converted to NZD this equals to 3.5% m/m and 11.6% y/y). NZD/USD remains in the bearish consolidation zone, the focus is on Q2 employment report due on Wednesday.

This Monday, the light economic calendar consists of Spanish July Net Employment, Swiss July PMI Manufacturing, UK July PMI Construction, Euro-zone June PPI m/m & y/y and US July ISM New York.