The latest non-farm payroll fell below 100K, the lowest in 10 months.  Will USD/JPY fall to 110.50 again?

The highly anticipated meeting between the two most influential leaders in the world ended last week.  President Trump and President Xi concluded the 2 days meeting on a positive note.  “We have a thousand reasons to get China-US relations right, and not one reason to spoil the China-US relationship,” Xi told Trump.  Trump described the relationship developed with Xi as “outstanding”.  “I believe lots of very potentially bad problems will be going away,’’ mentioned Trump.  Although no further details were provided, this could well be the best outcome.  The leaders of the world’s top two economies have done well to avoid further tension in times of geopolitical risks and a series of unfortunate terrorist attacks in Russia, Sweden and Egypt.

Many were expecting to see weak numbers in the latest non-farm payrolls, but not as weak as 98K.  This is the lowest in 10 months and second lowest in 3 years.  USD/JPY plunged in the first 5 minutes but recovered and rallied higher.  The unemployment rate came in at 4.5%, much better than expected and the lowest since July 2007.  The positive ending of the Trump-Xi meeting aided the recovery as well.

Geopolitical risks are fuelling demand for safe-haven.  FOMC meeting minutes did not provide clarity to the next rate hike and weak non-farm is dragging down the possibility of rate hike in June.  USD/JPY could be heading back towards 110 this week.

RBA* on hold, BOC** expected to hold

RBA held interest rate unchanged at 1.5%.  While they were optimistic about global growth, they acknowledged the weakness in their labour market.  Investors concluded RBA is likely to keep rates low for some time.  Risk aversion forced AUD/USD to 0.75 and started the week below 0.75.  The downward momentum is strong; profit taking could take the pair higher before going further down.

Canada posted a surprise trade deficit last week, which followed by another surprise – no major sell-off in the loonie.  The trade deficit was dwarfed by the WTI rally in the last 2 weeks, which took it to 53 dollars a barrel.  We expect BOC to hold its interest rate at 0.5% this week.  They may express concern over their trade deficit and global uncertainties, at the same time show optimism over the recovery in oil price in their statement.

* Reserve Bank of Australia     ** Bank of Canada

Our Picks

USD/JPY – Slightly bearish.  If this pair rejects the resistance around 111.45, consider going Short.

usdjpy

 

AUD/USD – Slightly bearish.  This pair broke round figure support 0.75.  Consider selling at rallies.

audusd

 

OIL/USD (WTI) – Slightly bullish.  Oil is having a strong recovery.  Consider buying at dips.

oil

Top News This Week (GMT+8 time zone)

UK:CPI y/y.  Tuesday 11th April, 4.30pm.

We expect figures to come in at 2.3% (previous figure was 2.3%).

Canada: Overnight Rate.  Wednesday 12th April, 10pm.

We expect figures to remain unchanged at 0.5% (previous figure was 0.5%).

US: Core Retail Sales m/m.  Friday 14th April, 8.30pm.

We expect figures to come in at 0.1% (previous figure was 0.2%).

Fullerton Markets Research Team

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Editors’ Picks

EUR/USD: Bulls battle 200-day EMA ahead of US PCE Inflation

EUR/USD is holding onto the recent recovery above 1.1900, up for first weekly gain in four. US dollar ignores firmer Treasury yields on fears of the PCE inflation gauge confirming the Fed’s hawkish tilt. Risk appetite remains positive, as Biden’s stimulus joins EU-UK trade optimism. Fedspeak eyed as well.

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GBP/USD attempts recovery toward 1.3950 as USD softens ahead of PCE data

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Gold prints first weekly gains in four around $1,780, US PCE data eyed

Gold stays on the front foot near $1780 in early Europe. US Treasury yields retreat, DXY struggles ahead of the Fed’s preferred inflation gauge of inflation. Market sentiment stays upbeat on US stimulus, trade headlines. Fedspeak also joins the watchers’ list for fresh impulse.

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The US Bureau of Economic Analysis will release the PCE inflation report on Friday, June 25. Markets expect the Core PCE Price Index, the Federal Reserve’s preferred gauge of inflation, to rise to 3.4% on a yearly basis in May from 3.1% in April.

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