Jump to content

US Dollar Jumps Up as Treasury Yields Leap on Fed Expectations. Where To From Here?


Recommended Posts

US DOLLAR, TREASURY YIELDS, FED, USD/JPY, ASX 200, NIKKEI 225, CSI 300 - TALKING POINTS

  • US Dollar gains traction as the market eyes the Fed’s hiking timeline.
  • APAC equities were mixed, with China specific news weighing the CSI 300.
  • USD/JPY broke key resistance. Will the US Dollar index (DXY) do the same?
U.S. dollar rebounds from post-Fed weakness, lifted by higher yields |  Reuters

The US Dollar continued higher in Asia today after kicking off the new year with a strong rally from the open in New York.

It was underpinned by US Treasury yields, with the benchmark 10-year bond leaping from 1.5% to trade above 1.63%. Expectations of further hikes from the Federal Reserve fueled the surge in interest rates across the curve.

While risk sentiment was positive, the growth and commodity linked currencies of AUD, CAD, NOK and NZD all got hit in the North American session but have managed to recover some ground today.

The yield sensitive USD/JPY made a 4-year high, breaking above the November peak of 115.52. Gold and silver were pummeled in the US Dollar melee, but crude oil was steady for the most part, trading above USD 76 a barrel.

Australia’s ASX 200 and Japan’s Nikkei 225 went higher today, following on from a positive start to the year from Wall Street overnight. Both bourses were up over 1.8% during the day.

Going in the other direction, Hong Kong and Chinese mainland indices were lower as the Peoples Bank of China (PBOC) didn’t add as much liquidity as expected.

Additionally, the renewable sector was rattled by a Chinese government announcement that they will be removing the subsidy for new energy vehicles after 2023.

The benchmark CSI 300 was down over 1.3% at one stage but managed to claw back some of the losses in afternoon trade.

In the US later today, the ISM manufacturing survey is due for release as well as the Canadian manufacturing PMI.

US DOLLAR INDEX (DXY) TECHNICAL ANALYSIS

The US Dollar index (DXY) rejected a move toward the recent low of 95.517 and this level may continue to provide support.

An ascending trendline that currently intersects just below 95.00 might also provide support, as well as the pivot point at 94.561 or previous lows at 93.278 and 91.947.

The 0.58% rally in the US session has seen it bump against the 21-day simple moving average (SMA) and a decisive break above it could see near term bullish momentum evolve.

Potential resistance may lie at the recent highs of 96.906 and 96.938.

Despite the significant move, volatility remains subdued, as shown by the relative narrowness of the 21-day SMA based Bollinger Band.

US DOLLAR INDEX (DXY) CHART

Chart created in TradingView

Written by Daniel McCarthy, Strategist for DailyFX.com. 4th Jan 2022

Link to comment
14 hours ago, RCtrader said:

Is there any significance in ADP and NFP having divergent forecast? 🤔

ADP is projected to be less than previous month while NFP is twice the amount released in December.  

Hi @RCtrader

ADP and NFP

Though the two reports draw their data from the US labor market, they are quite different in concept and their monthly results have been poorly correlated since the pandemic took hold in March 2020. 

The ADP employment total is simpler and more accurate, but less encompassing. Its National Employment Report records the net employee additions or subtractions of the firm's 460,000 US clients covering about 26 million workers. Payroll services are exclusively in the private sector and do not cover government employment at the local, state or federal level. 

The Employment Situation Report from the US Labor Department attempts to catalog the entire American employment market in one document. Known colloquially as the Nonfarm Payrolls (NFP) for its most quoted statistic, it tracks both hiring's and firings as reported to the government and estimates the number of new jobs created each month but not on government books. The combination of actual job figures and these projections produce the monthly NFP number. The monthly estimates are compared to the tax rolls once a year and adjusted to reflect the correct number of jobs gained or lost. By Joseph Trevisani, FXStreet: US ADP December Preview

 

Below is from US jobs report preview IG article by Joshua Mahony | Senior Market Analyst, London | Publication date: Thursday 04 November 2021

image.png

 

All the best - MongiIG

  • Great! 1
Link to comment
Just now, MongiIG said:

Hi @RCtrader

ADP and NFP

Though the two reports draw their data from the US labor market, they are quite different in concept and their monthly results have been poorly correlated since the pandemic took hold in March 2020. 

The ADP employment total is simpler and more accurate, but less encompassing. Its National Employment Report records the net employee additions or subtractions of the firm's 460,000 US clients covering about 26 million workers. Payroll services are exclusively in the private sector and do not cover government employment at the local, state or federal level. 

The Employment Situation Report from the US Labor Department attempts to catalog the entire American employment market in one document. Known colloquially as the Nonfarm Payrolls (NFP) for its most quoted statistic, it tracks both hiring's and firings as reported to the government and estimates the number of new jobs created each month but not on government books. The combination of actual job figures and these projections produce the monthly NFP number. The monthly estimates are compared to the tax rolls once a year and adjusted to reflect the correct number of jobs gained or lost. By Joseph Trevisani, FXStreet: US ADP December Preview

 

Below is from US jobs report preview IG article by Joshua Mahony | Senior Market Analyst, London | Publication date: Thursday 04 November 2021

image.png

 

All the best - MongiIG

Why you should know the key differences between job reports

BY PHALGUNI SONI, NOV. 20 2020. 

The employment reports are issued by Automatic Data Processing (ADP) and the Bureau of Labor Statistics (the BLS). 

Both the ADP-NER and the BLS Employment Situation reports issue monthly non-farm payrolls data for the U.S. However, there are several significant differences between the two.

The ADP (ADP) estimate includes only private non-farm payrolls, while the BLS estimate includes both private and government non-farm payrolls. 

The ADP releases just one estimate for non-farm payrolls addition, while the BLS releases an initial figure that’s revised twice to include results from companies that sent their responses late. The first BLS estimate includes results from ~70% of the survey size, while the second and third revisions include an additional 20% and 1% to 2% of survey responses, respectively.

The ADP-NER releases two days prior to the BLS non-farm payrolls release, which gives markets a heads-up on the BLS number.

Although the ADP data base and survey methodology are different from the sample used to compute the non-farm payrolls report issued by the Bureau of Labor Statistics (the BLS), ADP has estimated the data correlation between the private payroll additions reported in the ADP-NER and the final BLS Employment Situation report.

 

  • Great! 1
Link to comment
21 hours ago, RCtrader said:

Is there any significance in ADP and NFP having divergent forecast? 🤔

ADP is projected to be less than previous month while NFP is twice the amount released in December.  

SUMMARY
The ADP National Employment Report measures levels of non-farm private employment. The Report is based on the actual payroll data from about 24 million employees processed by the Automatic Data Processing, Inc.
image.png
 
 
 
 
NFP will be on Friday 7th Jan 2022 at 13:30 UK time

image.png

 

  • Great! 1
Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • The S&P 500, Nasdaq, and Dow Jones soared to new records on cooling inflation and Fed rate cut hopes, despite rising import prices. Key economic indicators and Fed minutes loom.   Written by: Tony Sycamore | Market Analyst, Australia   Publication date: Monday 20 May 2024 05:51 Last week, the S&P 500 and the Nasdaq reached fresh record highs, while the Dow Jones closed above 40,000 for the first time, locking in its fifth straight week of gains. Cooler US inflation data fuelled last week's record-breaking run, bolstering hopes of Fed rate cuts this year. The Nasdaq added 2.12%, the S&P 500 gained 1.54%, and the Dow Jones added 490 points (1.24%). Taking some gloss off Wednesday's post-CPI euphoria, import prices on Friday night rose 0.9% MoM in April, the most since March 2022, accelerating from an upwardly revised 0.6% gain in March. Nonetheless, the US rates market started the week pricing in a 70% chance of a 25 basis points (bp) Fed rate cut in September. While there is now a lack of tier one macro data, until Core PCE inflation data on the 31 of May, there is still plenty to keep traders busy this week, including the Feds meeting minutes, flash PMIs, durable goods, and a roster full of central bank’s speakers. On Thursday morning at 7:00am, AI super stock Nvidia's earnings are scheduled to drop, which my colleague Hebe Chen previews here. What is expected from FOMC meeting minutes Date: Thursday, 23 of May at 4am AEST At its meeting in May, US policymakers kept interest rates unchanged at 5.25%-5.50% as widely expected. Fed Chair Jerome Powell indicated a high threshold for additional rate hikes. However, he also highlighted a "lack of further progress" towards the Fed's inflation objective, which needs to be seen before considering rate cuts. This has been echoed by a slew of Fed officials' comments lately, with the high-for-longer rate outlook likely to be reiterated in the upcoming minutes. The minutes will be slightly backward-looking, given that they will not factor in the recent patch of softer economic data, including weaker-than-expected jobs growth and cooler inflation data, which has bolstered hopes of Fed rate cuts before year-end. Nevertheless, clues will be sought from the minutes on the timeline for possible rate cuts and policymakers' views on the inflation and growth outlook. S&P 500 technical analysis Last week's surge in the S&P 500 cash above the March high of 5264 negated the view that the correction viewed in April was missing a final leg lower and, in theory, suggests the uptrend has resumed towards 5400. However, before that can occur, the S&P 500 must first see a weekly close above the weekly trendline resistance at 5300/25is, which comes from the 4818 high of January 2022 and picks up the March 5264 high. On the downside, a break below 5150/20ish, the same level we leaned against in March and April, would indicate that the rally has run its course. S&P 500 weekly chart   Source: TradingView Nasdaq technical analysis Last week's surge in the Nasdaq cash above the March high of 18,464 negated the view that the correction viewed in April was missing a final leg lower and, in theory, suggests the uptrend has resumed towards 19,000. However, before that can occur, the Nasdaq must first see a weekly close above the weekly trendline resistance at 18,650/70ish, which comes from the 16,764 high of November 2021 and picks up the March 18,464 high. On the downside, a break below 17,750, the same level we leaned against in March and April, would indicate that the rally has run its course. Nasdaq weekly chart   Source: TradingView Source: Tradingview. The figures stated are as of 20 May 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.     This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
    • AUD/USD surged to .6693, its highest since January, driven by cooler US inflation and China’s property market measures. Upcoming RBA meeting minutes will be key.   Source: Getty Images   Forex AUD/USD United States dollar Inflation Australian dollar China Written by: Tony Sycamore | Market Analyst, Australia   Publication date: Monday 20 May 2024 08:11 Last week was a stellar one for the AUD/USD as it finished at .6693 (1.37%) for its highest weekly close since the first week of the year. In the first instance, the AUD/USD was boosted by cooler US inflation data, which weighed on a tired US dollar and reinforced expectations of Fed rate cuts before year-end. The second pillar of support for the AUD/USD came after the Chinese government announced a raft of measures on Friday afternoon to boost confidence in the Chinese property market. Measures announced included lowering deposit requirements and urging local governments to buy unsold homes and convert them into affordable housing. While more needs to be done to completely revitalize the Chinese property market, last week's announcement appears to mark the conclusion of seven years of pain after XI Jinping famously said, "Houses are for living in, not for speculation." After a mute response on Friday, the announcement's impact has flowed more readily through markets today. Evidence includes a 2% rise in the price of iron ore futures in Singapore to around $117.70 per tonne, while copper futures hit a new high today of $5.1990, up almost 3% at one point, following a 3.5% gain on Friday night. We would expect the impact to continue to extend into the AUD/USD; however, before it does so, there is the small matter of the RBA meeting minutes, in which the RBA sounded less hawkish than feared. RBA meeting minutes Date: Tuesday, 21 May at 11.30am AEST The minutes from the Reserve Bank of Australia (RBA)'s May meeting are scheduled to be released on Tuesday, May 21, at 11:30 am. At its board meeting in May, the RBA kept its official cash rate on hold at 4.35%, as widely expected. Despite a higher-than-expected Q1 inflation read, the RBA was less hawkish than feared as it retained a balanced bias, noting that it is not "ruling anything in or out". The RBA revised its inflation forecasts for this year higher, leaving its inflation forecasts unchanged for the end of 2025 and the end of 2026. At the same time, the RBA revised its growth and unemployment forecasts slightly lower. The minutes will be closely scrutinised to determine what options the RBA Board considered at its Board meeting in May and any clues behind the RBA's less hawkish than expected tone. RBA cash rate   Source: RBA AUD/USD technical analysis On the weekly chart, the AUD/USD has made an encouraging move towards the upper bound of the contracting multi-month bearish triangle. Downtrend resistance from the January 2023 .7158 high is currently at .6750ish. Uptrend support from the October 2022 .6170 low is at .6340ish. AUD/USD weekly chart   Source: TradingView Last week's post-US CPI surge above resistance at .6650/70 has increased the chances that the AUD/USD based at the April 19 .6362 low. Providing the AUD/USD continues to hold above support at .6670/50ish, it keeps the short-term uptrend intact and the AUD/USD on track for a test of downtrend resistance at .6750ish. On the downside, the AUD/USD has initial support from the 200-day moving average at .6520ish and below that, a layer of support at .6480ish from swing lows in March and April, reinforced by the February .6442 low. AUD/USD daily chart   Source: TradingView Source: Tradingview. The figures stated are as of 20 May 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.     This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
    • Copper, gold, and silver prices surged to record highs in Asian trade on Monday, with silver crossing $30 an ounce. Gold's 18% year-to-date rally is attributed to Chinese buying, geopolitical tensions, and expectations of falling US interest rates. Copper prices are soaring due to China's efforts to revive its struggling property market, including $1 trillion in funding for affordable housing. Traders are scrambling to source physical copper to cover large short positions in futures markets, driving up trading volumes. US stock indices hit new records last week after inflation data, but yields rose on Friday as investors await more economic data. This week features preliminary PMI figures, Fed minutes, Nvidia earnings, and speeches from policymakers like Fed Vice Chair Philip Jefferson.  
×
×
  • Create New...
us