Dollar little changed after strong jobs report

Stocks higher. Rates higher.

The dollar is him relatively little changed after the stronger than expected US jobs reports. They were bounce bit by the higher initial claims and continuing claims for the week.
US stocks are higher with the NASDAQ up nearly 100 points in the Dow up 376 points. The S&P index is up 35.6 points currently.
US yields are higher, with the yield curve steepening. The 2 year is up 0.6 basis points to 0.164%. The 10 year is up 2.5 basis points at 0.700%. The 30 year is up the most with a gain of 3.4 basis points to 1.457%.
In the forex:
  • EURUSD. The EURUSD is up a few pips after rising from 1.12852 to a high of 1.12969. The current price is trading around 1.1285
  • USDJPY: The USDJPY move from 107.25 to a high of 107.557. That was near the high price from the Asian and London morning session. The pair is currently trading at 107.51 up about 26 pips from the pre-market level. The price is trading right around its 100 hour moving average at 107.496
  • GBPUSD. The GBPUSD moved from 1.2509 to a high of 1.2529. We currently trade at 1.2509 – unchanged from the premarket level.
  • NZDUSD: The NZD is the strongest of the major currency pairs today. It moved from 0.6515 at the time of the release to a new session high of 0.65359. We currently trade at 0.6526 up about 11 pips from the premarket level.
  • USDCAD: The USDCAD has seen more of a move lower compared to the other pairs. The price traded at 1.35905 at the time of the release and move down to a low of 1.3564. The pair currently trades at 1.3569, down 21 pips from the prerelease level.

The USDJPY tests 38.2% retracement and bounces

Price doesn’t fall below upward sloping trendline and 100 hour moving average in the process

The USDJPY is trading lower on the day after a move above its 100 day moving average late yesterday and that the start of the new trading day faded.
Price doesn't fall below upward sloping trendline and 100 hour moving average in the process_
The 100 day moving average comes in at 107.878 today. The price moved above it in the last few hours of trading yesterday and extended to the highest level since June 9 at 108.158 before reversing lower. Buyers turned to sellers after breaking back below its 100 day moving average and trundled lower.
The fall took the price below an upward sloping trendline (currently at 107.56). And its 100 hour moving average at 107.426 currently (blue line in the chart above). However, the next target at the 38.2% retracement at 107.359, and recent swing highs from June 26 (at 107.346) and June 29 (at 107.367), stalled the fall. The low reached 107.355.
The price currently trades at 107.47 in this trying to hold support against its 100 hour moving average and the currently hourly bar.
If the price can hold that 100 hour moving average level, we could see a rotation back to the upside. If not getting below the 38.2% retracement is still a hurdle that needs to be surpassed. A correction to the 38.2% retracement is simply a plain-vanilla correction.
Overall some bearishness, but the bearishness has found a stall point at a corrective target. Getting below the 100 hour moving average and 38.2% retracement is still key for further downward momentum.

EUR/USD keeps higher to start the session, runs into test of key near-term levels

EUR/USD buyers look to seize near-term control as the dollar keeps weaker

EUR/USD H1 29-06

The dollar is keeping lower to start the new week, despite the more tepid and slightly softer risk mood as we get things going in European morning trade today.
As the greenback gives back some of its gains from the latter half of last week, we’re seeing EUR/USD run back up to test key near-term resistance currently.
Buyers managed to push back above the 200-hour MA (blue line) @ 1.1241 and are now challenging the 100-hour MA (red line) @ 1.1256.
Keep below the 100-hour MA and the near-term bias stays more neutral, with price action to be more caught in between the two key hourly moving averages.
But break above the 100-hour MA and we will see buyers start to seize more near-term control and potentially look towards 1.1275-80 next before re-approaching 1.1300.
Considering the current risk mood, it is hard to see the pair push much higher as long as investors are looking to keep more cautious and defensive amid virus jitters.
The resurgence in US cases is starting to prompt renewed virus restrictions and new outbreaks being reported in the likes of Beijing, Tokyo, and Australia only adds to the concerns in the market over the past two weeks.
That said, month-end and quarter-end rebalancing flows are still something to consider – even if you would think most would have been settled by last week.
For now, the overall picture is that the dollar is weaker and the best we can do is to be guided by the technical levels highlighted above.

Monday morning open levels – indicative forex prices – 29 June 2020

Good morning, afternoon or evening to all ForexLive traders and welcome to the start of the new FX week.

As is usual for a Monday morning, market liquidity is very thin until it improves as more Asian centres come on online … prices are liable to swing around on not too much at all, so take care out there.

Some small change from late Friday levels:

EUR/USD 1.1224

USD/JPY 107.11
GBP/USD 1.2343
USD/CHF 0.9475

USD/CAD 1.3669
AUD/USD 0.6860

NZD/USD 0.6416
I’ll be back soon with weekend news.
Meanwhile, it looks like the coronavirus situation in the is not getting much better.
  • Some LA County businesses have been ordered to close again.
  • The Governor of Texas says the infection has taken a swift an dangerous turn in the state
USD is touch better supported in the really early going here, AUD, kiwi, CAD down a few points.

CFTC Commitments of Traders: Yen longs and CAD shorts increase

Forex futures positioning data for the week ending June 24, 2020:

  • EUR long 118K vs 117K long last week. Longs increased by 1K.
  • GBP short 19K vs 16K short last week. Shorts increased by 3K.
  • JPY long 27K vs 22K long last week. Longs increased by 5K.
  • CHF long 1K vs 2K long last week. Longs trimmed by 1K
  • AUD short 5k vs 7K short last week. Shorts trimmed by 2K
  • NZD short 0K vs 2K short last week. Shorts trimmed by 2K
  • CAD short 21k vs 25K short last week. Shorts trimmed by 4K
  • Prior week

There were big moves in the euro and Australian dollar last week. It’s interesting to note that AUD was the best performer this week, so cutting shorts was the right move for specs.

This week there’s a modest shift into risk-off trades like CAD/JPY shorts.

US dollar buying ebbs even with stocks touching a new low

Dollar sellers arrive

Dollar selling has picked up after Europe closed for the week. USD/CAD is about 30 pips off the highs even with stocks near the lows.
Dollar sellers arrive
This could be FX leading a turn in the risk trade or it could be flows.
I’m sympathetic to the idea that the US can uniquely under-perform because the virus is hitting the US so much harder than other developed countries. The bond market is also weighing, with US 2-year yields down 2 bps to 0.16%.

USD/JPY threatens fall to six-week low

Big turnaround in USD/JPY

A mix of risk-on has shifted into more of a dollar selloff.
It’s been a wild ride in USD/JPY today as the pair dropped on the Navarro story, then rebounded on the denial, then jumped on a positive risk tone and has now plunged. USD/JPY is now just pips away from the June low of 105.57.
Big turnaround in USD/JPY
At the moment support at that low is holding but a breakdown would clear the way for a test of 106.00, which was the early-May low.

5 reasons AUD/USD is going to 0.7400

Morgan Stanley’s latest out look report project the Australian dollar to 0.74 in 2021

MS look for what they describe as “front-loaded gains” for AUD:
  • Australia will outpaces developed market peers on economic growth
  • should also benefit from expansionary fiscal policy
  • RBA to be relatively-less-dovish
  • Australia is open to positive growth areas like manufacturing-sensitive Asia
And, further:
  • high carry should also make it an attractive destination for yield-seekers
By 2021 other economies should have caught up to Australia.
After that “Australia’s structural economic challenges related to household indebtedness and deleveraging once again come into focus”, which will halt the AUD gain around 0.74.

Can the US dollar disconnect from the risk trade?

That’s an idea that has to be on the table

Ultimately, a bet on a currency is a bet on that country’s growth. Yes there are a dozen caveats because of the structure of global capital but growth wins and the growth story often gets lost.
We’re ultra-accustomed to the safety trade and the US dollar’s role in that but it’s not the only safe haven. The two best year-to-date performers are the yen and Swiss franc.
That's an idea that has to be on the table
Also notice that the euro is basically unchanged against the dollar this year. Now, the consensus opinion is that Europe is a black hole of growth and the past 12 years makes that pretty clear but you could argue that’s all priced in.
I can envision a world where growth diverges widely because of differing coronavirus numbers. This chart is stark, especially with Europe’s population exceeding the US by 25%.
Europe vs US on coronavirus
Is it so tough to envision a year or so of better-than-expect European growth compared to the US because of the virus. Certainly, the US has proved it’s better at running an economy but Europe right now looks like it’s better at running public health, and that matters.
That said, here are German daily cases and they’re also worth keeping an eye on:
So what’s the trade? There is none right now. I think technicals are the way to trade right now and there is a beautiful head-and-shoulders top in EUR/USD.
The risk trade is the only game in town. The head-and-shoulders pattern targets 1.10 so there’s nothing to consider until there.
There’s also a host of other currencies, including an Australian dollar trade that I highlighted seven weeks ago that’s gone extremely well.
The overall point is that the old fashioned ‘risk trade’ is seductive when volatility is high but the rules of FX are often rewritten and now is as good of a time as ever.

CFTC Commitments of Traders: Big swings in AUD and EUR

Forex futures positioning data for the week ending June 16, 2020:

  • EUR long 117K vs 96K long last week. Longs increased by 21K.
  • GBP short 16K vs 24K short last week. Shorts trimmed by 8K.
  • JPY long 22K vs 17K long last week. Longs increased by 5K.
  • CHF long 2K vs 2K long last week. No change
  • AUD short 7k vs 37K short last week. Shorts trimmed by 30K
  • NZD short 9K vs 11K short last week. Shorts trimmed by 2K
  • CAD short 25k vs 26K short last week. Shorts trimmed by 1K
  • Prior week
Aussie shorts really threw in the towel but EUR longs continue to pile in. That’s a fresh two-year high and a massive one-week move.
Forex futures positioning data for the week ending June 16, 2020: