FOREX: USD Index Extends Decline Following Weak US Employment Data
Nov-03 19:15By: Jack Lewis
- Despite some early greenback strength, the USD index looks set to close the week with a substantial 1.5% decline. A combination of factors provided headwinds; unexpectedly moderate Treasury quarterly refunding projections, weaker-than-expected ISM & NFP data and a moderately dovish tilt to the November FOMC meeting.
- Specifically on Friday, the weak employment data in the US shunted the greenback lower once more and set the tone for the entirety of the session. Associated moves in fixed income and another leg higher for equities continued to bolster the USD weakness, underpinning substantial moves higher for the likes of EUR, GBP, AUD and especially NZD which has risen 1.6%.
- EURUSD has breached key short-term resistance at 1.0694, the Oct 24 high and a clear break of this hurdle strengthens a bullish case, signalling scope for a stronger short-term correction towards 1.0809, the Sep 4 high.
- Notably, USD/CNH broke below the uptrendline support drawn off the late July low. The move opens 7.2698 the Oct10 low. Weakness through here opens levels last seen in mid-September. Moves come ahead of key trade balance and inflation data from China out next week which is expected to show a still shrinking export and import market, resulting in the highest trade surplus since April.
- Interestingly, USDSEK fell back below the 11.00 handle, breaching the 50-day EMA at 11.0053 in the process and representing the largest 1-day fall in the pair since July 12, currently 2.2% lower.
- Given the renewed greenback weakness, currency markets will be paying particular attention to further Fed speakers, jobless claims and UMich data next week. Eurozone services PMIs and the RBA rate decision headline the calendar across Mon/Tues.
