EURUSD moves back toward swing level resistance

The 1.19516 level is eyed as a key target if the buyers are to take more control.

The EURUSD fell to a new cycle lows after the better-than-expected jobs report. The low price reach 1.18927. That was the lowest level going back to November 26 and got close to the 61.8% retracement of the range since the November 2020 low (at 1.1887).
The 1.19516 level is eyed as a key target if the buyers are to take more control.
The price bounce has taken the pair to a high of 1.19457. Just above that level since the swing low going back to February 5. In trading early today buyers tried to hold above that level, but ultimately the level gave way and the price moved lower.
If the buyers are to take more control intraday getting above that level is key. Stay below and the sellers remain in control.
Break above the swing area and traders will look toward the close yesterday at 1.19703. Above that and the swing low from Tuesday’s trade at 1.19907 would be the next target followed by the 100 day moving average near 1.2028. In trading yesterday, the price fell back below the 100 day moving average and raced to lower. That moving average level remains a key bias defining level for traders.

WTI crude rises to highest since 2019 as it breaks $66

Oil on an absolute sizzler

Oil on an absolute sizzler
Oil has turned into the best trade of the year as stocks (particularly tech) continue to struggle.
OPEC+ delivered an incredible boost to the market yesterday and the earlier timeline on vaccines is providing a one-two punch.
Today’s rally breaks the January 2020 high of $65.65. That came after the US assassinated Iranian general Qasem Soleimani and Iran retaliated by launching rocket attacks at US bases in Iraq.
The next resistance level is the 2019 high of $60.60. Crude might be overdue for a pullback but if the market is tight, there’s nothing to trigger it. Oil is also so hated that spec positioning isn’t particularly long. In short, this is such a hated trade that I think it can continue to run if $60.60 breaks. In Brent, the 2019 high is way up at $76 so there’s more room to run there (spot at $69).

Initial reactions: Dollar moves higher after better jobs data. 10 year yield higher.

10 year yield moves to a new cycle high

the better US jobs report has push the 10 year yield up 4.9 basis points to 1.6133%. The high yield spiked to 1.6238%. That is the cycle high for yields going back over a year.

The US dollar has moved higher as well but is retracing some of the gains. Equities moved lower initially. The Dow industrial average and S&P have moved back into positive territory. The NASDAQ index remains negative.
Looking at some of the currency pairs:
EURUSD: The EURUSD moved to the lowest level since November 26. The low reach 1.18927. That was just above the 61.8% retracement of the move up from the November 2020 low to the January 2021 high. The retracement level came in at 1.1887 vs the low at 1.18927. Buyers leaned leaned. A break below be needed to solicit more selling
10 year yield moves to a new cycle high
GBPUSD: The GBPUSD move down to test the swing low going back to February 12 at 1.37748. The low reach 1.3778 and bounced. There is resistance at 1.3829 to 1.38402. Watch that area for intraday bias clues.

US dollar rises on strong non-farm payrolls report

Higher yields drive dollar bid

The US dollar is at the best levels of the day in the aftermath of a surprisingly strong non-farm payrolls report.
The dollar moved higher in lockstep with yields. US 10s are up 5.1 bps to 1.615%, breaking last Thursday’s spike high.
The gains in the dollar pushed EUR/USD below 1.19 in a break below the February low.
Higher yields drive dollar bid
So far though, the moves aren’t running. The initial dollar pops have mostly faded.
The bond market is in charge at the moment though.

February non-farm payrolls +379K vs +198K expecte

February 2021 US jobs data:

non-farm payrolls
  • Prior was +49K (revised to +166K)
  • Unemployment rate 6.2% vs 6.3%  expected
  • Prior unemployment rate 6.3%
  • Participation rate 61.4% vs 61.4% expected (was 62.8% pre-pandemic)
  • Prior participation rate 61.4%
  • Underemployment rate 11.1% vs 11.1% prior
  • Average hourly earnings +0.2% m/m vs +0.2% expected
  • Average hourly earnings +5.3% y/y vs +5.3% expected
  • Average weekly hours 34.6 vs 34.9 expected
  • Two month net revision -159K
  • Change in private payrolls +465K vs +200K expected
  • Change in manufacturing payrolls +21K vs +15K expected
  • Long-term unemployed at 4.1m vs 4.0m prior
  • The employment-population ratio, at 57.6% vs 57.5% prior
  • Full report
Good news is bad news with this report. US 10-year yields touched above last week’s high immediately afterwards and the dollar rose. That’s weighed on US equity futures.

Risk keeps more cautious, Treasuries calmer for now

Equities stay on the defensive even as bonds are seen calmer so far today

European equities are keeping lower with the DAX down 0.8%, with US futures also hinting at softer tones following yesterday’s selloff.

Dip buyers were a little interested at the tail-end of Asian trading but the mood has turned since with S&P 500 futures seen down 0.4%, Nasdaq futures down 0.6%, Dow futures down 0.4%, and Russell 2000 futures down 0.8% currently.
10-year Treasury yields are keeping calmer, sitting a little lower on the day just below 1.55%. However, there’s little doubt that sentiment remains fragile at this stage.
As much as other central banks are stepping up their game in quelling the bond market rout, the Fed is leading the charge on the other side and that is tough to ignore.
It is truly gut check time for equities ahead of the weekend with the S&P 500 breaching key trendline support and eyeing its 100-day moving average:


Nikkei 225 closes lower by 0.23% at 28,864.32

The Nikkei closes near the highs for the day as losses are trimmed

Nikkei 05-03
The risk mood at the tail-end of Asian trading is one that looks to be getting better as the market digests the post-Powell narrative. The BOJ has certainly helped to ease concerns in the Japanese market but Treasuries are still the key spot to watch.
Though at some point you have to wonder, where is the ceiling here before the Fed really feels the need to offer a firmer reaction? That said, the market may gather a sense of calm for now but it is still early in the day to be calling for a major turnaround.
However, given that the Fed is still pumping so much liquidity into the market and that we are set to embrace Biden’s stimulus package, are things really so bad?
The Hang Seng has also erased earlier losses to turn flat while the Shanghai Composite is trading up 0.3% going into the closing stages. Elsewhere, US futures have also pared heavier declines earlier on to keep around flat levels at the moment.

Japan 10-year government bond yields extend fall after Kuroda comments

10-year JGB yields are down by 8 bps today to 0.07%


Kuroda delivered a number of dovish remarks earlier in an attempt to jawbone the JGB market after having seen 10-year yields open higher at 0.15% earlier today.

So far, that is working as yields have fallen to their lowest since mid-February. Then again, when you own more than two-thirds of the bond market, it would be embarrassing to not be able to dictate conditions in the way you’d want them to be.

The reflation trade and the struggle between bond markets and central banks

Reuters polled analysts on the ‘reflation ‘ trade with most expecting it to continue at least another month.

  • 50 of 65 strategists, in response to an additional question predicted moves in currency markets based on an upswing in economic activity and prices, or the reflation trade, would continue for at least another month, including 33 who said over three months.
The piece was published Thursday.
In it was a forecast for the EUR/USD at 1.25 in 12 months  (same as the January and February polling).
Some of the remarks conveyed by Reuters are interesting:
  • “There is this battle going on now between the pricing-in of this reflation trade and on the other hand the central banks just wanting to temper the pace of the optimism,” said Jane Foley, head of FX strategy at Rabobank. “We’ve got this period of struggle between the bond markets and the other central banks trying to keep optimism from getting too significant – and in that period what we might see is the dollar being a little bit more resilient than the consensus has been expecting.” 
  • “Yes, real yields will be higher, but then there’s a level of yields which will be consistent with the fact the (growth) outlook is more optimistic. If we stabilize for two or three weeks, the market will decide you can live with it,” said Steve Englander, head of G10 FX research at Standard Chartered. “I’m still pessimistic about the dollar with everything that’s going on. What gives me confidence in my outlook is: there’s no piano which dropped out of a window that landed on the sidewalk, and they’re looking at it and saying – wow! Nobody will ever be able to fix it.” 
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