EUROPEAN FX UPDATE: Dollar in the doldrums pre-NFP as JPY outpaces G10 peers

Analysis details (09:08)

DXY, JPY

Another session of early European weakness for the broader Dollar and index as the JPY continues to strengthen, and after a feeble attempt overnight to nurse some recent Powell-induced losses. DXY ultimately failed to print above 105.00 after notching a 104.56-105.90 range on Thursday and falling under its 200 DMA (at 105.50 today). From a technical perspective, the DXY is back down at levels seen in late June, with the 29th June low in proximity at 104.35 as the index currently prints a 104.36-88 parameter. The highlight of the day will be the US jobs report in which the rate of payroll additions is expected to cool once again, with analysts forecasting 200k nonfarm payrolls will be added in November (prev. 261k), while the unemployment rate is seen unchanged at 3.7%. Given that the Fed’s policymaking is currently centred around managing inflation, traders will be closely watching the wages metrics; the expectation is for wage growth to continue cooling, and this will likely form a key part of how traders will react to the data (Full Newsquawk preview available in the Research Suite). Aside from that, Fed’s Barkin and Evans are slated to speak today – after the PCE and jobs data – and ahead of the Fed blackout period commencing tomorrow in the run-up to the 14th December FOMC meeting. Meanwhile, the JPY is again the marked outperformer with gains fuelled by further narrowing yield differentials post-Powell, and with BoJ’s board member Tamura yesterday striking somewhat of a hawkish tone, which is rare among BoJ members. USD/JPY slipped from a 135.59 high, through its 200 DMA (134.50) before the plunge intensified to a fall below the 17th August low at 133.88 ahead of the 16th August low at 132.92.

NZD, AUD, CHF, EUR, GBP

All modestly firmer against the USD and to varying degrees. NZD/USD continues to edge higher after topping its 200 DMA yesterday (at 0.6287 today) with the pair eyeing 0.6400 to the upside from a 0.6356 intraday base, with the next upside level being the 15th Aug 0.6456. AUD/USD is underpinned by the broader Dollar softness but remains within yesterday’s 0.6779-6843 range at the time of writing. USD/CHF eyes the 14th April low at 0.9322  as it inches lower from a 0.9387 peak. EUR/USD topped yesterday’s 1.0533 high from a 1.0506 low whilst GBP/USD remains towards the top end of yesterday’s 1.2050-2309 range.

CAD

The Loonie is once again the G10 laggard in the run-up to the Canadian jobs report. “The consensus is centred around a very small 10k increase, and there is a high chance we could see a negative read. This would probably keep markets leaning in favour of a 25bp rate hike by the Bank of Canada next week (currently, 30bp are in the price). However, we see room for some upside surprise today in the jobs numbers and see a higher chance of another 50bp by the BoC”, posits the desk at ING. From a technical standpoint, the pair resides at the midpoint of a tight 13421-53 range, with the 100 DMA to the downside at 1.3398.

CNH

USD/CNH continues to trundle lower amid a softer Dollar and overall sentiment surrounding the loosening in COVID-zero protocols, with the pair falling from a 7.0630 high through its 100 DMA (7.0187) for the first time since April this year.

02 Dec 2022 - 09:10- Research Sheet- Source: Newsquawk