AUD Leads Risk FX UP, USD Flat; Welcome to Payrolls Friday!

  • Michael Moran , Senior Currency Strategist at ACY

  • 08.10.2021 08:30 am
  • #stock

Summary: Welcome to Payrolls Friday! As my fingers hit the keyboards while my brain contemplates Friday, Payrolls Day. Ringing in my head is the tune of Phil Collins’ 1989 hit tune, “Just Another Day in Paradise”. Indeed, its just another day for you and me in FX land. Ahead of what is anticipated to be an upbeat September Payrolls report. Median forecasts are for a Jobs Creation number between 490,000 to 500,000, from 235,000 in August, and the Unemployment Rate to fall to 5.1% from 5.2%. Yesterday’s sharp fall in the Weekly Jobless Claims to 326,000 from a previous 362,000 that beat expectations of 350,000 was the catalyst for a solid Employment report tonight. A Reuters report added that the number of people on state unemployment rolls plunged to an 18-month low in September. US lawmakers agreed to extend the country’s Debt Ceiling by USD 408 billion to early December which added to the market’s improved risk sentiment.

The Dollar Index (USD/DXY), which is a popular measure of the Greenback’s value against a basket of 6 major currencies was little changed, settling at 94.20 from 94.22 yesterday. Risk leader, the Australian Dollar outperformed, jumping 0.42% above the 0.7300 threshold to 0.7312 (0.7275 yesterday). Canada’s currency, the Loonie was next best performer against the Greenback after Canadian IVEY PMI (a diffusion index of purchasing managers) soared to 70.4 in September (from 66.0 in August), beating estimates at 60.5. Against the US Dollar the Canadian Loonie finished at 1.2547 (1.2588), a gain of 0.36%. The Kiwi (NZD/USD) rebounded from its opening yesterday of 0.6915 to 0.6933, up 0.25%. The Euro extended its lacklustre performance dipping to 1.1553 (1.1560 yesterday). Germany’s Industrial Production in September plunged to -4.0% from +1.3% in August, underwhelming forecasts at -0.4%. The USD/JPY pair edged higher to 111.61 (111.38) on the market’s improved risk appetite. Emerging Market and Asian Currencies saw modest gains versus the Greenback. The USD/CNH (Dollar-Offshore Chinese Yuan) pair was last at 6.4525 from 6.4545, while USD/SGD (US Dollar-Singapore Dollar) closed at 1.3583 (1.3590 yesterday).
Wall Street stocks rebounded. The DOW finished up 1.03% to 34,797 (34,435) while the S&P 500 rallied to 4,403 from 4,365 for a gain of 0.82%. Global bond yields rose. The US 10-year Treasury note rate settled at 1.57% (1.53%). Germany’s 10-Year Bund Yield was last at -0.19% (-0.18%). Canadian 10-year Treasuries yielded 1.56% at the close, against 1.50% yesterday.
Data released yesterday saw Japanese Leading Economic Indicators for August at 101.8% from a previous 104.1%, and forecasts of 102.0%. Switzerland’s September Unemployment Rate matched expectations at 2.8%. UK Halifax House Price Index rose to 1.7% from 0.3%, beating forecasts at 1.3%. Italy’s August Retail Sales rose to 0.4%, bettering estimates at 0.2%.

  • AUD/USD – Short-covering continued for the AUD/USD pair, as risk sentiment improved ahead of today’s US Payrolls report. The Aussie Battler jumped to an overnight high at 0.7324 from its 0.7275 opening yesterday as speculative short AUD bets scrambled to cover. The AUD/USD pair settled at 0.7312 in late New York, up 0.42%, and best performing major.
  • EUR/USD – The shared currency produced another lacklustre performance against the modestly weaker US Dollar weighed by another disappointing German economic indicator. The Euro finished at 1.1553, marginally lower than 1.1560 yesterday.
  • USD/CAD – The Greenback finished 0.36% lower against the Canadian Loonie to 1.2547 from 1.2588 yesterday. Canada’s IVEY PMI data bettered forecasts, climbing to 70.4 from 66.0 and beating median expectations at 60.5. Overnight low for the USD/CAD pair was at 1.2548.
  • USD/JPY – the mostly risk-on stance by the markets boosted this currency pair. The Greenback settled 0.18% higher against the Japanese currency to 111.61 from 111.38 yesterday. Overnight high traded was 111.64. The USD/JPY pair looks poised to trade higher should we see a good US Jobs report tonight.

On the Lookout: Welcome to Payrolls Friday once again. Its all about the Jobs Creation number which is released later tonight. US Jobs Creation is expected to show an improvement from August’s weak 235,000 number. Which was the fewest in seven months. Jobs creation estimates centre around +500,000. Economists expect the Unemployment rate to dip to 5.1% from 5.2%. Other data released prior to the US Payrolls kick off in Asia with Japan’s Annual Average Cash Earnings for August (m/m f/c -2% from previous -0.9%, y/y f/c -1.5% from previous 0.7% - ACY Finlogix). Japan’s August Current Account follows (f/c +JPY 1540.9 billion from previous +JPY 1910.8 billion – ACY Finlogix). Australia follows with its August Final Building Approvals (m/m f/c 6.8% from -8.6% - ACY FInlogix). Australia’s RBA releases its Financial Stability Review, an assessment of conditions in the financial system (12.30 pm Sydney time). China follows with its September Caixin Services PMI (f/c 49.3 from 46.7). Japan rounds up Asian reports with its September Economic Watchers Sentiment Survey. European data start with Germany’s August Trade Balance – Surplus (f/c +EUR 15.8 billion from previous +EUR 17.9 billion). Canada kicks off North American data with it’s September Employment Change (f/c from 59,500 to 65,000 from previous 90,200), and Canadian September Unemployment Rate (f/c 6.9% from 7.1%). The US reports its September Non-Farms Employment Change (Payrolls – f/c 500,000 from August 235,000 – ACY Finlogix), US September Unemployment Rate (f/c 5.1% from 5.2% - ACY Finlogix), and US Average Hourly Earnings (Wages –m/m f/c 0.4% from 0.6%). US August Final Wholesale Inventories round up the day’s reports (f/c 1.2% from 1.2%).

Trading Perspective: it’s all about tonight’s Payrolls numbers and unless we get an extremely bad report, the US Dollar will remain supported. A bad number would be for the Jobs Creation or Payrolls number to be less than 400,000. And a Jobless number of over 5.3%, say 5.4% to 5.5%. With the speculative trading community long of USD bets, this could a huge shakeout. Risk currencies like the Aussie would plunge, despite a lower Greenback. The USD/JPY pair would also fall.
A number which is close to expectations would see the Dollar trade in familiar ranges against its various rivals. The risk currencies, led by the Aussie would maintain FX dominance. Keep an eye out on treasury bond yields as well.
A strong US jobs creation number of +600,000 or higher would see the USD spike higher against its Rivals. The USD/JPY pair would lead the USD higher.

  • AUD/USD – The Aussie outperformed FX overnight due to a combination of improved market risk sentiment and overall short speculative AUD/USD positions. Overnight high traded for the Aussie Battler was at 0.7324. Immediate resistance lies at 0.7330 followed by 0.7350 and 0.7380 (strong). A weak US Payrolls report could see the Aussie break the 0.7380 resistance level and approach the 0.7400 cent threshold. A strong US Payrolls report would see the Aussie tumble through 0.7270 supports. Likely range prior to the number, 0.7270-0.7330. Tin helmets on for the Aussie Battler tonight for sure.
  • EUR/USD – The Euro has had a lacklustre performance this week. The shared currency has not broken out of its 1.1500 to 1.1650 range this week. Overnight the EUR/USD hit a high at 1.1572 before setting at 1.1553 in late New York. The Euro needs to break up through 1.1650 resistance to push higher. The catalyst would be a weak US Payrolls report, say of less than 400,000 jobs created. There are no major European economic data releases today so its all about the US Payrolls. Immediate resistance lies at 1.1580 and 1.1610. Immediate support can be found at 1.1540 and 1.1510. Likely range today 1.1530-1.1610.
  • USD/CAD – Tonight is one of those Fridays when both the US and Canadian Employment reports are released at the same time. The US Payrolls report almost always has the biggest influence on this currency pair unless the Canadian data is way outside of expectations. USD/CAD closed modestly lower at 1.2547 (1.2588). Overnight low traded was at 1.2540. For today immediate support lies at 1.2540 followed by 1.2510, and then 1.2480. Immediate resistance can be found at 1.2580, 1.2610 and 1.2640. Heading into the numbers, look for a likely consolidation range of 1.2530 to 1.2630. Tin helmets on for this puppy as well.
  • USD/JPY – we could be in for a big move on the USD/JPY pair should the numbers surprise. Overnight the USD/JPY traded to a high at 111.64. Today we can find immediate resistance at 111.80 followed by 112.10 (strong). The next resistance level is found at 112.50 and 112.80. Immediate support for today lies at 111.50, 111.30 and 111.10. A strong US Payrolls number and higher US yields would boost the USD/JPY pair to 112.00 and beyond. A weak report could see the 111.20 support level broken, with the next support at 109.90. Look for consolidation into the number tonight between 111.20-111.70. Tin helmets on for this puppy as well.



Welcome to another Friday Payrolls Day in FX land. Just another day in FX…Tin helmets on for tonight folks… let’s get ready to rumble! Happy Friday, happy days!

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