Summary: The Dollar held on to one-month lows against a basket of currencies despite a tumble in Private payrolls growth and a slowing activity in the Services sector. Risk sentiment improved on a Bloomberg news report that said that China and the US were heading closer to a trade deal despite harsh rhetoric. The Euro lifted to a one-month peak at 1.11162 before easing to 1.1078 in New York. An improvement in Services PMI’s from Germany, Spain and the Eurozone offset weaker Italian and French data. Sterling soared to 1.3120, 7-month highs, and best performing currency as Boris Johnson’s Conservatives continue to lead in polls ahead of the December 12 election. The Canadian Dollar rallied 0.70% against the Greenback to 1.3204 (1.3300) after the Bank of Canada left its Overnight Interest Rate unchanged at 1.75% and policy steady. The Australian Dollar ended little changed at 0.6850 (0.6845) after slipping to 0.6813 as Q3 GDP slowed. USD/JPY rallied 0.2% to 108.88 (108.62) as market sentiment improved on the news that China and the US were still moving ahead on a trade deal.
Wall Street stocks rallied, reversing their 3-day decline. The DOW finished 0.52% up at 27,645. (27,450.) while the S&P 500 climbed 0.61% to 3,111.00 (3,087).
Australia’s Q3 GDP grew 0.4%, missing forecasts of 0.5%. Annual Q3 growth matched expectations at 1.7%. China’s Caixin Services PMI climbed to 53.5, beating estimates at 51.2. Spain’s Services PMI rose to 532. (f/c 51.9), French Services PMI dipped to 52.2 from 52.9, Germany’s Services sector rose to 51.7 (f/c 51.3). Eurozone Final Services PMI climbed to 51.9 (f/c 51.5). The UK’s Final Services PMI beat forecasts at 49.3 vs 48.6. US ISM Non-Manufacturing PMI slipped to 53.9 from 54.7 and an expected 54.5. Finally, US ADP Private Job Employment created 67,000 Jobs, missing median forecasts of 140,000 and a previous 125,000.
- EUR/USD – The Euro finished moderately higher against the US Dollar at 1.1080 from 1.1074 yesterday after trading to 1.11162 overnight and 4-week high. Overall US Dollar weakness kept the shared currency supported. Euro area services data were mostly higher.
- GBP/USD – Sterling soared to trade at 1.31204, a 7-month peak as Boris Johnson and his Conservative Party continued to lead polls heading into the December 12 election. US Dollar weakness after another dismal set of economic data is supporting the British currency.
- USD/JPY – The Dollar saw a modest rise against the Yen, up 0.2% to 108.85 (108.63) on the market’s improved risk sentiment. Global bond yields were higher overnight with the US 10-year up 6 basis points to 1.77%. Japan’s 10-year JGB slipped to -0.06% from -0.04%.
- AUD/USD – The Australian Dollar finished little changed at 0.6848 (0.6842) after Australia’s GDP slowed in Q3 to 0.4% against expectations of 0.5%. However, Annualised GDP growth matched forecasts at 1.7%.
On the Lookout: The Dollar Index (USD/DXY) dipped to 97.682 (97.734), marginally lower, holding one-month lows. US November Private Payrolls increased by just 67,000 well below median expectations of 150,000, and the lowest count since May. The dismal climb in Private Payrolls calls into question Friday’s Payrolls report, expected to climb to 187,000 from October’s 125,000. The ongoing trade war is damaging US Jobs and the economy. The weakness in manufacturing could be due to the billions of Dollars in duties levied between both sides. “
Today sees Australia’s November Retail Sales and Trade Balance. Germany reports its Factory Orders (November). Eurozone Retail Sales and Final Employment Change (Q3) reports follow. The US reports on its Challenger Job Cuts, Trade Balance, Weekly Unemployment Claims and Factory Orders. Canada reports on its Trade Balance for November.
Trading Perspective: After a series of upbeat data, US economic reports have continued to disappoint. Adding further pressure on the Dollar is the fact that current market positioning is long US Dollars. We reported last week that net total US Dollar bets increased in the week to November 19. The US Dollar is breaking down.
- USD/DXY – The Dollar Index dipped to an overnight and one month low at 97.433 before settling to close at 97.682. There is immediate support at 97.40 followed by 97.10. On the topside, immediate resistance can be found at 97.80 (overnight high traded 97.788). The next resistance level lies at 98.10. Look for consolidation today with a likely range of 97.40-97.80. Look to sell rallies.
- EUR/USD – The Euro climbed above the 1.11 level to trade to 1.11162, overnight and fresh one-month high, closing at 1.1078. Euro area Services data were mostly upbeat compared to that in the US. If the trend of improving European data and weakening economic reports out of the US continue, the Euro will strengthen. EUR/USD has immediate resistance at 1.1120 followed by 1.1150. Immediate support lies at 1.1060 (overnight low 1.10668) and 1.1030. Look for a likely range today of 1.1065-1.1125. Let not forget that market positioning is short of Euros. Prefer to buy dips.
- AUD/USD – The Australian Dollar dipped to an overnight low at 0.6813 before climbing on overall US Dollar weakness to 0.6848. The Aussie Dollar is headed higher as the Greenback drives lower. The Aussie has immediate support at 0.6810 followed by 0.6790. We can find immediate resistance at 0.6860 (overnight high traded was 0.6855). The next resistance level lies at 0.6890. Look for consolidation with a likely range at 0.6845-0.6895. Prefer to buy dips.
- USD/JPY – The Dollar rallied against the Yen to 108.90 from 108.65, for a gain of 0.2%. The market’s improved risk appetite and higher US 10-year yield supported this currency pair. Expect the Dollar Yen to find immediate resistance at 109.00 (overnight high 108.96) followed by 109.30. Immediate support for today lies at 108.60 followed by 108.30. While USD/JPY has steadied, any further weakness in US data will see this currency pair lower. US yields will come down and erode support for USD/JPY. We also highlighted last week that market positioning moved to short JPY in the latest COT report. Look to sell USD rallies with a likely range today of 108.40-109.00.
Happy trading all.
