FX Weekly Review, August 29 – September 2: Disappointing Jobs Data Doesn’t Break the Buck

Swiss Franc Currency Index

During this week the Swiss Franc index lost against both dollar and euro. The CHF index ended one percent down.

Despite not convincing US jobs, the dollar index ended in positive territory.

Swiss Franc Currency Index (3 years)

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USD/CHF:

US Dollar

EUR/USD

The euro recovered from the midweek low of nearly $1.1120 to $1.1250 after the US employment data.  The $1.1260 area corresponds to a 61.8% retracement of the Yellen-Fischer spurred decline.  At $1.1245 the euro retraced 50% of the decline since the August high near $1.1365. With reasonable prospects of ECB action, and still lingering ideas that the employment data is sufficient for the FOMC, participants may be hesitant about pushing the euro much above that $1.1250 area.   The $1.1100-$1.1150 band may cushion losses.  The 200-day moving average is found in the middle of that band.  A break of $1.11 could set up a test on the August low by $1.1045.

USD/JPY

The dollar has been particularly resilient against the yen. It posted an outside up day.  The dollar was testing JPY100 before Yellen/Fischer, and after a little hiccup on the jobs data (saw JPY102.80), it recovered to make new session highs a little below JPY104.

A trendline drawn off the late-May high (~JPY111.45) and the mid-July high (~JPY107.50) is found near JPY104.30 at the start of the new week and JPY103.80 by the end of the week.

The 61.8% retracement of the drop since that mid-July high is JPY104.45. A break of that area may spur a move toward JPY105.50.

GBP/USD

AUD/USD

The Australian dollar looked like it had legs.
After the US jobs data, it spiked to $0.7615 from around $0.7545.

It stopped short of the 20-day moving average (~$0.7620), which also corresponds to the 50% retacement of the Aussie’s erosion since $0.7750 was approached in mid-August.  Support is seen in the $0.7490-$0.7500 area.  A break would open the door toward
$0.7400

USD/CAD

Weak economic data, the drop in oil prices, and the prospect of a Fed hike has kept the Canadian dollar on the defensive since the middle of August. 

The US dollar approached the CAD1.3150
area before pulling back before the weekend.  The US dollar initially sold below CAD1.30; it quick met new buyers. To signify anything important, the US dollar would need to be sold below CAD1.2980.  In lieu of that, the greenback can return to the CAD1.3100-CAD1.3140 area.

US Dollar - Canadian Dollar FX Rate

Click to enlarge.

Crude Oil

The October light sweet crude oil futures
contract had a horrible week.

It lost 7.25% on top of the 3% drop the previous week.  The market has become more skeptical of an agreement later this month to cut or even freeze output.

The five-day moving averagecrossed below the 20-day.  However, despite the dollar’s recovery after the employment data, oil prices remained firm.  A move above $44.45 may see a correction toward $45.75-$46.00.

US Treasuries

The US 10-year Treasury yield made both the high and low prints for the week after the jobs data (1.54% and 1.62%).

The December note future made the high for the week before the weekend, but it held just above the week’s low of 130-14.  Below there the 130-00 may attract interest (131-00 basis the
September contract).  Yields in Europe and Japan may be dragged higher by the backing up of US yields.

The Sept Bund futures contract finished the week below an uptrend line that began in late-April.   The Sept JGB futures contract broke down to post its lowest close since March, amid speculation that the BOJ may slow its purchases of long-term bonds ostensibly to force a re-steepening of the yield curve.

Yield US Treasuries

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S&P 500 Index

In the last two weeks, the S&P 500 has only closed higher three times and once was before this past weekend. 

Moreover, the S&P 50 gapped higher after the employment data.  That gap is found between Thursday’s high (~2173.55) and Friday’s low (~2177.50).  We suspect the gap will be closed over the next several sessions, but expect the broad trading range to persist
that will keep prices mostly in a 2150-2200 band .

The pre-weekend US equity advance and the dollar’s resilience against the yen suggest further upside for the Nikkei next week.  A move above 17000 for the first time since early-June could signal another 500 point rally to test the April highs.

The DAX also looks poised to move higher.  The first target is the August and year high a little above 10800.

S&P 500 Index

Click to enlarge.