US bond yields, Dollar slide on Fed easing bias

Summary

The Greenback weakened across the board after Fed Chair Jerome Powell reiterated the central bank’s easing bias despite a delay. Powell ruled out the possibility of a rate hike. The Fed kept its Fed Funds rate unchanged at 5.50%.

The Dollar Index (DXY), a popular gauge of the Greenback’s value against a basket of 6 major currencies, slid to 105.37 from 105.57. US bond yields fell, the 10-year closed at 4.58% (4.62%).

Against the Japanese Yen, the US Dollar tumbled to 153.65 from 156.10 yesterday. Suspected intervention from Japan Inc and broad-based USD weakness boosted the Japanese currency.

The Aussie Battler (AUD/USD) extended its rally against the Greenback, edging up to 0.6565 from 0.6535 yesterday. Positive market sentiment favored the risk-leading Australian Dollar. New Zealand’s Kiwi (NZD/USD) climbed to 0.5960 from 0.5930.

Sterling (GBP/USD) climbed to 1.2535 from 1.2525 yesterday. The Euro (EUR/USD) rallied to 1.0725 from 1.0710. ECB Chief Economist Philip Lane said that they will continue to follow a data-dependent approach.

Improved risk sentiment lifted the Asian and Emerging Market Currencies against the Greenback. The USD/CNH (Dollar-Offshore Chinese Yuan) pair slid to 7.2070 (7.2450).

Against the Singapore Dollar, the Greenback dipped to 1.3550 from 1.3595 while USD/THB (Dollar-Thai Baht) eased to 36.77 from 36.95 yesterday.

Global stocks rallied on the risk-on sentiment. The DOW soared to 38,407 (37,085) while the S&P 500 rose to 5,083 from 5,047 yesterday. Australia’s ASX 200 climbed to 7,625 (7,605).

Economic data released yesterday saw Japan’s April Consumer Confidence slide to 38.3 from 39.5 previously, and lower than estimates at 39.7. US Weekly Unemployment Claims were unchanged at 208,000, beating expectations at 212,000.

USD/JPY – In volatile trade, the Greenback ended at 153.65 (156.10 yesterday). The USD/JPY pair traded to an overnight high at 156.29 while the overnight low recorded was at 153.05. Speculation of further intervention by Japan Inc weighed on the USD/JPY pair.

AUD/USD – The Aussie Battler extended its rally against the US Dollar, finishing at 0.6565 (0.6535 yesterday). Improved risk sentiment and broad-based US Dollar weakness boosted the antipodean currency. The overnight high traded was 0.6574 while the overnight low recorded was 0.6511.

EUR/USD – The shared currency edged 0.14% higher against the Greenback, settling at 1.0725 in late New York (1.0710 yesterday). Overnight, the Euro climbed to a high against the Greenback at 1.0731 while the overnight low recorded was at 1.0674.

GBP/USD – Sterling edged higher to 1.2525 from 1.2525 yesterday. The British currency was pounded to an overnight low at 1.2472 before rebounding to its New York close. The overnight high traded for Sterling was at 1.2545.

On the lookout

Today’s economic calendar is light, while China (May Day) and Japan (Constitution Memoria Day) celebrate public holidays. Australia kicks off with its Australian Judo Bank April Services PMI (f/c 54.2 from 54.4 – ACY Finlogix), Australia March Home Loans (m/m f/c 1% from 1.6% - ACY Finlogix) and Australian March Investment Lending for Homes (f/c 0.7% from 1.2% - ACY Finlogix). France kicks off Europe with its March Industrial Production (m/m f/c 0.3% from 0.2% - ACY Finlogix). Italy follows with its March Unemployment Rate (f/c 7.5% from 7.5% - ACY Finlogix).

The UK releases its April S&P Global Services PMI (f/c 54.9 from 53.1 – ACY Finlogix). The Eurozone follows with its March Unemployment Rate (f/c 6.5% from 6.5% - ACY Finlofix). The US rounds up today’s economic calendar releases with its US April Average Hourly Earnings (m/m f/c 0.3% from 0.3%; y/y f/c 4% from 4.1% - ACY Finlogix), US April Unemployment Rate (f/c 3.8% from 3.8% - ACY Finlogix), and US April Non-Farms Payrolls (f/c 243K from 303K – ACY Finlogix).

Canada releases its S&P Global Services PMI (f/c 47.7 from 46.4 – ACY Finlogix). The US rounds up today’s economic data releases with its S&P Global Services PMI (f/c 50.9 froom 51.7 – ACY Finlogix).

Trading perspective

Welcome to Payrolls Friday! The Dollar finished on a soft note following remarks from Jerome Powell who reiterated the Fed’s easing bias despite a delay. US bond yields slid with the benchmark 10-year note settling at 4.58% (4.62%). The Dollar Index (DXY) slid to 105.37 from 105.57 yesterday. The focus turns to the US Jobs report. Economists are forecasting a median Payrolls gain in April of between 238K and 243K (303K previously).

The Unemployment Rate is expected to be 3.8%, unchanged from March. Traders would need to see a Payrolls gain of 250K or higher, say 270K for the Greenback to see a robust rally. The Jobless Rate would have to come in at 3.7% or lower as well. Expect Asian markets to consolidate around current levels with the Dollar maintaining a soft tone and weaker bias.

USD/JPY – Suspected intervention from Japanese authorities combined with broad-based weakness weighed on the Greenback. The USD/JPY pair plummeted to 153.65 from 156.10. Immediate support today lies at 153.30 and 153.00 (overnight low traded was 153.05). Immediate resistance can be found at 154.00, 154.60 and 155.10. Look for consolidation today in a choppy range between 153.00-155.00. Stay tuned to Japan Inc.

AUD/USD – The Aussie Battler jumped to 0.6565 from 0.6535 yesterday. Immediate resistance today lies at 0.6580 (overnight high traded was 0.6574). The next resistance level is found at 0.6610 and 0.6640. Immediate support can be found at 0.6530, 0.6500 and 0.6470. Look for another roller coaster ride, likely between 0.06500 and 0.6600.

EUR/USD – The shared currency edged higher to 1.0725 from 1.0710 yesterday. Look for immediate resistance in the Euro at 1.0750 followed by 1.0780 and 1.0810. On the downside, look for immediate support at 1.0700 followed by 1.0670 (overnight low traded was 1.0674). Look for the Euro to consolidate in a likely trading range of 1.0670-1.0740. Pre-US NFP, trade the range.

GBP/USD – Sterling rallied modestly against the overall weaker US Dollar to 1.2535 from 1.2525 yesterday. On the day, look for immediate support at 1.2500 followed by 1.2470 (overnight low traded was 1.2474). The next support level is found at 1.2440. Immediate resistance can be found at 1.2550 (overnight high traded was 1.2545). The next resistance level is found at 1.2580 followed by 1.2610. Look for Sterling to trade a likely range (pre-US NFP) of 1.2480-1.2550.

Have a good Friday and Payrolls Day all, and a top weekend too.