Robust payrolls lift US yields, Dollar; Biden signs debt deal

USD/JPY surges, Euro, GBP slide; AUD, Stocks rally, risk-on

Summary:

US May Non-Farms Payrolls rose by 339,000, beating expectations of 190,000, boosting yields and the Dollar. The US Jobless Rate rose to 3.7% from 3.4%. Wages eased to 0.3% (0.5%).

Joe Biden, the US President signed the debt limit deal into law, averting a default. Wall Street stocks rallied. The DOW surged 1.96% while the S&P 500 gained 1.3% at the close.

The US 10-year Treasury bond rate climbed to 3.69% from 3.59%. Other global bond yields rose. Germany’s 10-year Bund yield rose to 2.31% (2.24%).

Against the Japanese Yen, the Greenback surged above 139.00, settling at 139.95. Japan’s 10-year JGB yield dipped to 0.40% (0.41%). The overnight high traded for USD/JPY was 140.07.

The Dollar Index (DXY), which weighs the value of the Greenback against a basket of six major currencies, rose 0.47% to 104.05 (103.57).

The Euro (EUR/USD) slid 0.5% to 1.0707 after rallying to an overnight high at 1.0779. Sterling (GBP/USD) slumped 0.97% to 1.2450 after soaring to 1.2545 earlier in the session.

Despite broad-based Dollar strength, the Aussie Battler (AUD/USD) rallied to 0.6605 (0.6575) on expectations that the RBA could tighten monetary policy further. The Kiwi (NZD/USD) rose to 0.6070.

The Greenback was mixed against the Asian and Emerging Market currencies. Against the Chinese Offshore Yuan, the Dollar (USD/CNH) dipped to 7.1045 from 7.1205 Friday. USD/SGD slid to 1.3470 against 1.3520. USD/THB (Dollar-Thai Baht), however rose to 34.80 (34.57).

Other economic data released on Friday saw New Zealand’s Trade Balance (q/q) fall to -1.5% from the previous 1.8%, matching forecasts. French April Industrial Production rose 0.8% from -1.1%.

• USD/JPY – The Dollar Yen pair had a volatile session, initially tumbling to an overnight low at 138.60 before surging to 140.07, overnight high. At the close of trade, USD/JPY settled at 139.97. In contrast to the rise in the US 10-year yield, Japan’s JGB rate dipped.
• EUR/USD – The shared currency slid 0.54% to 1.0707 (1.0762 Friday). Broad based US Dollar strength weighed on the Euro. Overnight, the Euro traded to a high at 1.0779 before the release of the US Payrolls report. Germany’s 10-year Bund yield rose 7 basis points to 2.31%.
• AUD/USD – Against the trend, the Aussie Battler rallied against the Greenback. At the close of trade in New York, the AUD/USD pair was at 0.6605 (0.6575 Friday). In choppy trade of its own, the Aussie jumped to a high at 0.6639 before easing. The overnight low was 0.6575.
• GBP/USD – Sterling eased against the overall stronger US Dollar to 1.2450 from Friday’s opening at 1.2527. The British currency was pounded to an overnight low at 1.2404 in volatile trade. The GBP/USD pair saw a high at 1.2545.

On the lookout:

Upbeat US Payrolls will keep the Dollar bid in Asia this morning ahead of a busy economic calendar for today.

Australia kicks off today’s data releases with its Judo Bank Final May Services PMI (f/c 51.8 from 53.7 – ACY Finlogix).

New Zealand markets are closed today in observance of the Queen’s birthday.

Australia also releases its ANZ Bank May Job Advertisements (f/c 0.7% from -0.3% - ACY Finlogix). Australia also releases its Q1 Company Gross Profits (f/c 2% from a previous 10.6% - ACY Finlogix).

Japan follows next with its Jibun Bank May Final Services PMI (f/c 56.3 from 55.4 – ACY Finlogix).

China follows with its May Caixin Services PMI (f/c 55 from 56.4 – ACY Finlogix).

Germany starts off European data with its German April Trade Balance (f/c +EUR 16 billion from +EUR 16.7 billion – ACY Finlogix).

Switzerland follows with its May Inflation Rate (y/y f/c 2.2% from 2.6% - ACY Finlogix).

France releases its May Final Services PMI (f/c 52.8 from 54.6 – ACY Finlogix), Germany releases its May Final Services PMI (f/c 57.8 from 56 – ACY Finlogix), the Eurozone follows with its May Final Services PMI (f/c 55.9 from 56.2 – ACY Finlogix), and Eurozone April PPI (m/m f/c -3% from -1.6% - ACY Finlogix).

The UK follows with its May UK S&P Global Services PMI (f/c 55.1 from 55.9 – ACY Finlogix).

The US rounds up today’s data releases with its US S&P May Final Global Services PMI (f/c 55.1 from 53.6 – ACY Finlogix), US ISM May Services PMI (f/c 52.3 from 51.9 – ACY Finlogix), and finally US April Factory Orders (m/m f/c 0.8% from 0.9% - ACY Finlogix).

Trading perspective:

The upbeat US Payrolls report coupled with news that Joe Biden signed the debt deal lifted risk appetite, as well as US stocks, bond yields and the Dollar.

Traders will look to the next set of US economic data.

Analysts expect the ISM May Services PMI to climb to 52.3, up from the previous 51.9.

US Factory Orders are expected to dip to 0.8% from 0.9%.

Asian traders will be content to maintain the overnight trading ranges and wait for the data releases.

China releases its Caixin May Services PMI which is expected to ease to 55 from a previous 56.4 (ACY Finlogix).

Any number weaker than 55 could see a drop in risk appetite, providing short term support for the Greenback.

• USD/JPY – Look for further choppy moves in the Dollar-Yen pair which closed just under the 140.00 resistance level at 139.97. For today, look for immediate resistance at 140.10 followed by 140.30 to cap any rallies. Immediate support can be found at 139.70, 139.20 and 128.90. Expect some rhetoric from Japan Inc if volatility stays high in this currency pair. Look for a likely range today 139.10-140.10. Keep those tin helmets on.

• EUR/USD – The Euro finished at 1.0707 against the broad-based stronger US Dollar. On Friday, the EUR/USD pair opened at 1.0765. On the day, look for immediate support at 1.0700 (1.0702 was the overnight low traded). The next support lies at 1.0670. Immediate resistance can be found at 1.0740, followed by 1.0780 (overnight high traded was 1.0779). Look for a likely trading range today of 1.0685-1.0785. Look to sell into Euro strength.
• AUD/USD – The Aussie Battler held its own, settling at 0.6605 (0.6575 Friday) supported by risk-on and stronger equities. On the day, look for immediate resistance at 0.6640 (overnight high 0.6639). The next resistance level can be found at 0.6670. On the downside, immediate support lies at 0.6570 followed by 0.6540. Look for further choppy trade in the Aussie, likely range today: 0.6575 – 0.6675. Trade the range.
• GBP/USD – The British Pound tumbled against the US Dollar to 1.2450 at the close of trade on Friday. Sterling opened at 1.2527 in Asia on Friday, trading to an overnight high at 1.2545 before plummeting to 1.2450. Look for immediate support at 1.2430 followed by 1.2400 (overnight low traded was 1.2404). Immediate resistance for today lies at 1.2480, 1.2510 and 1.2540. Look for further choppy moves in Sterling, likely range today: 1.2410-1.2510.

Have a good Monday and week ahead all. Happy trading.