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XE Market Analysis: Asia - Jun 04, 2021

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The Dollar fell broadly in N.Y. on Monday, the result of a weaker May U.S. jobs report, and subsequently sharp drop in Treasury yields, as Fed tapering concerns were largely taken off the table for now. From Thursday's high to Friday's low, the 10-year Treasury yield fell 7 basis points to 1.56%, weighing on the USD, while at the same time supporting Wall Street, which rallied on Friday. The rate sensitive NASDAQ outperformed, rising 1.4% ahead of the close. Next week's U.S. calendar is relatively light, but will feature key May CPI data, along with trade, and JOLTS job opening figures.

[EUR, USD]
EUR-USD rallied from near 1.2115 into the Jobs report, later peaking at 1.2186 in the aftermath of the NFP miss, and up from three-week lows of 1.2104 seen overnight. The Dollar turned broadly weaker after the jobs report, weighed down by sharply lower Treasury yields, which were the result of easing taper talk concerns. The employment report was not good enough to see the Fed shift its stance toward tapering anytime soon. The 10-year yield fell nearly 7 basis points on the session. While EUR-USD remains lower on the week, follow through buying could resume on Monday, especially if yields continue to fall.

[USD, JPY]
USD-JPY continues to take it on the chin as does the USD in general, dropping to 109.37 from 110.15 seen ahead of the jobs data, and overnight highs of 1.1033. The slide in Treasury yields has been the culprit, as the jobs report was not good enough to prompt the Fed to move any closer to QE tapering, while the weaker factory orders didn't help either. The 10-year Treasury yield was down nearly 7 basis points on the session. Tuesday's 109.33 low is the next downside target, followed by the 50-day moving average, which is currently at 109.21.

[GBP, USD]
Cable abruptly turned higher after the U.S. jobs report, which missed the mark on the NFP front. The pairing had hit three-week lows of 1.4083 overnight, as solid U.S. data on Thursday broadly supported the Dollar, while firmed up yields helped the USD as well. That was turned around on Friday, as tapering concerns were unwound following the softer U.S. data. 10-year Treasury yields slipped from a high of 1.63% on Thursday, to 1.56% on Friday, which weighed broadly on the Greenback. Cable opened the session at 1.4117, later topping at 1.4200.

[USD, CHF]
The SNB continues to maintain its expansionary policy stance. The statement stressed that the pandemic "is continuing to have a strong adverse effect on the economy", adding that despite the "recent weakening, the Swiss franc remains highly valued" and against that background the policy rate was held at -0.75% and the bank stressed that "it remains willing to intervene in the foreign exchange market as necessary". The bank will also continue to supply the banking system with liquidity on "generous" terms. Nothing really new there, despite the fact that the SNB lifted its conditional inflation forecast on the back of higher oil prices and a weaker CHF. EUR-CHF briefly topped the key 110.00 mark for the first time in nearly two-weeks, though quickly turned lower, bottoming at 109.56, as the 50-day moving average at 1.1005 provided resistance.

[USD, CAD]
USD-CAD fell under 1.2075 from 1.2130 in the aftermath of the U.S. and Canada jobs reports, both of which were softer than expected. The USD had slipped broadly following the NFP miss in the U.S. data. Oil prices remain near trend highs, which will limit USD-CAD upside for now. Two-straight months of Canada labor market softness will keep the BoC steady as she goes, following the surprise hawkish stance taken at its last meeting, where the Bank tapered its QE program. Initial USD-CAD support is now at 1.2030, which was Thursday's low.

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