- US June employment data dominated the day: the 224k increase in non-farm payrolls far exceeded market expectations of 160k, with only a minor -11k downside revision to the prior months (May 72k from 75k), and the majority of gains in the private sector (+191k, est. +151k). The +0.1% rise in the previously sticky participation rate to 62.9% caused unemployment to rise to 3.7% from 3.6% and underemployment to rise to 7.2% from 7.1%.
- Global tension points over the weekend included Iran, which said it would breach its uranium enrichment cap, and Turkey, where the president fired the central bank head for not reducing interest rates.
- US 2yr treasury yields jumped from 1.75% to 1.88%, and 10yr yields jumped from 1.94% to 2.07% in response to the jobs report. Markets are now pricing 27bp of easing at the July meeting (from 32bp pre-jobs report), with a total of three cuts priced by mid-2020.
- Australian 3yr government bond yields followed US yields and jumped from 0.91% to 0.96%, 10yr yields jumping from 1.30% to 1.37%. Markets are pricing only a 15% chance of an RBA rate cut in August.
- Gold fell 1.2% to $1400 as expectations for Fed rate cuts receded. Iron ore fell 4% to $116.55 as Chinese steelmakers lobbied their government to control prices.
- The US dollar index closed up 0.5% on the day, the US dollar outperforming all the majors.
- EUR fell from 1.1280 to 1.1218, most of the move related to the US jobs report.
- USD/JPY rose from 107.80 to 108.43.
- AUD fell from 0.7020 to 0.6958.
- NZD fell from 0.6680 to 0.6602.
- AUD/NZD rose slightly from 1.0520 to 1.0540.
- Upbeat US employment data pleased US Dollar (USD) buyers.
- 21-day EMA continues to restrict Aussie declines.
- ANZ Job Advertisements can offer fresh direction together with US-China trade clues.
With the Friday’s US Nonfarm Payrolls (NFP) still pleasing the USD buyers, the AUD/USD pair seesaws near multi-day low while taking the rounds to 0.6980. The Aussie pair thumped on the NFP-day after the headline US employment data came in better than expected, turning previous greenback bears into the bulls. Reflecting the market sentiment was the US 10-year treasury yields that rose nearly 8 basis points to 2.04%.
However, the AUD still remains above 21-day EMA that it crossed sometime during late-June, indicating the pair buyers’ worries on the back of global market weakness and the US-China trade uncertainty.
Recently, China’s SCMP raised doubts on the latest positive news from the G20 where the US and Chinese President’s agreed to restart previously stalled trade talks. The daily mentioned that Trump and Xi are no closer to a deal, even if they are ‘friends’. Elsewhere, the US President Donald Trump kept exerting the pressure on the US Federal Reserve to cut the benchmark Fed rate.
For now, June month ANZ Job Advertisement (prior -8.4%) is the only data up on the economic calendar to watch. Though, news headlines concerning the US-China trade story and/or affecting global market risk sentiment can have its own impact.
A 21-day exponential moving average (EMA) at 0.6971 becomes the key support to follow, a sustained downside break of which can recall 0.6940 and 0.6910 numbers on the chart. On the contrary, 0.7000 and 100-day EMA level of 0.7020 seem nearby resistances to watch during the pair’s recovery
Event Risk Data Today
- Japan: BOJ Governor Kuroda speaks at the branch managers meeting.
- Europe: Jul Sentix investor confidence is released after dipping back to -3.3 in Jun following the flare up in trade disputes.
- Germany: May industrial production is released ahead of the Euro Area measure on Friday.