August 2, 2024

• Treasury yields plunge to 3.782%, post-NFP
• US nonfarm payrolls rise just 114,000 (previous 206,000), Unemployment jumps to 4.3%.
• US dollar opens mixed, trades defensively post NFP

FX at a Glance

Source: IFXA/RP

USDCAD open 1.3876, overnight range 1.3847-1.3888, previous close 1.3874

The Canadian dollar and managed to weaken even as AUD and NZD squeezed out minor gains overnight. That is likely because if the US economy is heading for a hard landing, the Canadian economy will be collateral damage. In addition the CAD/US 10-year yield spread  widened in favour of the US dollar.

The Canadian government is passed a new investment killing  increase in capital gains tax on June 25 and touted that it would raise $19 billion to be reinvested in housing. The Parliamentary Budget Office says it will only raise $17.4 billion. Canadian’s know that very little of governments windfall will be used as promised.

WTI oil prices are steady in a 76.17-77.30 range on fears of production disruptions if Iran reacts to being embarrassed and attacks Israel.

Canadian markets are closed Monday.

USDCAD Technicals

The intraday USDCAD technicals are bullish above 1.3850, looking for a break above 1.3910 to extend gains to 1.3950. A move below 1.3840 suggests a retest of support at 1.3810.

Longer term, the USDCAD technicals are bullish with the base of the July uptrend line supported by previous resistance levels in the 1.3800 area reverting to support.

For today, USDCAD support is at 1.3840 and 1.3810.  Resistance is at 1.3890-10 and 1.3950.  Today’s Range 1.3840-1.3940

Chart: USDCAD daily

Source: DailyFX

Did the Fed Blow it-Again?

Bond and equity traders seem convinced that the US economy is headed for a hard landing, and the Fed hasn’t caught on yet.  Today’s weak nonfarm payrolls report suggested the market may be right especially considering this weeks poor data. ISM manufacturing data’s weak employment component along with disappointing JOLTS, ADP Employment, and weekly Jobless claims numbers, suggests the US economy is heading for a face plant. Traders believe the Fed should have cut rates this week due to the employment weakness.

A Nasty Nonfarm Payrolls

Today’s US NFP report is weak. The economy only added 114,ooo jobs (forecast 175,000 vs previous 206,000) while the unemployment rate rose to 4.3% from 4.1%. and an unchanged unemployment rate of 4.1%. The results reinforced the  “Fed missed the boat” argument. However, it’s the dog days of summer, and the wild price action may just be noise, exaggerated by lower volumes.

Risk Aversion Rages

The US 10-year Treasury yield plunged from 4.20% at the start of the week to 3.782% today. Gold prices soared, rising 4.7% since Monday and reaching $2,477.73 , post NFP. overnight. S&P 500 futures plunged from being down 1.20%, pre-NFP to 1.80% afterwards. Earlier, Asian equity indexes plummeted and closed deep in the red. Japan’s Topix index lost 6.14%, while Australia’s ASX 200 fell 2.11%. European bourses are negative, led by a 1.41% drop in the German DAX, while the UK FTSE 100 is flat.

EURUSD

EURUSD spiked to 1.0874 post-NFP after trading in a 1.0781-1.0825 range. EURUSD technicals are bearish below 1.0950, eyeing a break below 1.0770.

GBPUSD

GBPUSD traded in a 1.2708-1.2753 range overnight  then climbed to 1.2797 in NY, after plunging from a pre-BoE monetary policy meeting peak of 1.2864. Traders are still digesting the implications of the BoE’s decision to cut its benchmark rate by 25 bps yesterday. Analysts consider the move to be a “hawkish cut” due to the split nature of the vote (5 for, 4 against) and Governor Bailey’s warning that the Bank has to be “careful not to cut interest rates too quickly or too much.” The April GBPUSD uptrend remains intact while prices are above 1.2690.

USDJPY

USDJPY plummeted to 147.02 after trading negatively in a 148.62-149.77 range overnight.. USDJPY is being pressured by falling US Treasury yields, safe-haven demand for yen, and speculation that the BoJ will raise rates again in October. Additionally, the risk of further BoJ intervention is lingering.

Chart: USDJPY pre and post NFP-15 minute chart

Source: Investing.com

AUDUSD and NZDUSD

AUDUSD traded in a 0.6486-0.6541 range and is at the top of that band in NY.  AUDUSD gains may be limited due to lower commodity prices and China’s economic growth slump. Australia’s PPI rose 4.8% y/y (previous 4.3%).

NZDUSD mirrored AUDUSD moves and traded in a 0.5930-0.5982 band.

USDMXN

USDMXN rallied yesterday following soft US data and consolidated the gains in an 18.8508-19.0055 range. Prices jumped to 19.2221 after the US data but then quickly fell to 19.0266. Mexico’s unemployment rate rose 2.8% from 2.6%

FX high, low, open (as of 6:00 am ET)

Source: Investing.com

China Snapshot

PBoC fix: 7.1376 vs exp. 7.2437 (prev. 7.1323).

Shanghai Shenzhen CSI 300 fell 1.02% to 3384.39.

Yesterday, a member of the PBoC monetary policy committee said the government should shift their focus from investment strategies and look at strategies for increasing consumption. He said.  “The economy has entered a new stage and the total demand,  including consumption, exports and even investment is no longer as strong as before.”

Chart: USDCNY and USDCNH

Source: Investing.com