Greenback weakens after June jobs report
The US dollar fell to a two-week low after the June non-farm payrolls data disappointed markets overnight.
The June payrolls report showed 57,000 new jobs were created, well below the forecast of 113,000. However, there was some positive news, with the unemployment rate falling to 4.2% from 4.3%.
The greenback tumbled, with the USD Index down 0.6%, reaching its lowest level since 18 June.
The USD fell most sharply against other safe-haven currencies, with USD/JPY down 0.9% and USD/CHF down 0.7%.
EUR/USD and GBP/USD both gained 0.5%.
AUD/USD and NZD/USD were 0.4% higher.
In Asia, USD/CNH gained 0.1%, while USD/SGD climbed 0.2%.
Yen eases from 40-year low
Before the jobs number, USD/JPY climbed to levels not seen since the post-Plaza Accord period, putting the spotlight on the 163–165 zone. We believe this area could increase the likelihood of official intervention.
That said, the pace of the yen’s decline may matter more than any specific exchange rate level. Japanese authorities may be less inclined to step in unless moves become unusually rapid or disorderly. Questions also remain about the effectiveness of intervention, given Japan’s previous JPY11.7 trillion intervention effort delivered only short-lived support for the yen. Even so, intervention could have a greater impact if accompanied by coordination or clear backing from the US Treasury.
USD/JPY remains near its multi-decade peak, trading just below the 40-year high above 162.00. The pair is around 0.3% below its recent high of 162.84, reached on 1 July. Initial support is seen at the 21-day EMA at 161.23, followed by the 50-day EMA at 160.15 and the 100-day EMA at 158.90.
EUR/JPY is trading around 1.7% below its recent high of 187.95, reached on 17 April. The next key support level is the 100-day EMA at 184.34.
Sterling tests one-year highs on shaky foundations
Sterling heads into the end of the week higher against its G10 peers, reaching one-year highs against the euro, Swedish krona and Canadian dollar. The pound and gilt markets continue to look through the fragile political backdrop, while UK rates, among the highest in the developed world, make it expensive to hold short sterling positions. A low-volatility FX environment is also discouraging renewed selling of the pound.
GBP/EUR has broken above key resistance at 1.16 and briefly flirted with 1.17. The move was partly driven by short covering. A light UK data calendar has also dampened sterling’s reaction to the less hawkish recalibration by the ECB and the Fed. It is likely only a matter of time, however, before more dovish signals from the BoE begin to weigh on sterling.
GBP/EUR’s near-term interaction with support at 1.1650, followed by 1.16, should help gauge the strength of the breakout.
Meanwhile, GBP/USD has retraced most of the losses seen after the Fed’s hawkish 19 June meeting, moving back above the 21-day moving average near 1.33. The 1.34 level now stands out as key resistance, with a break higher likely to challenge the broader downtrend that has been in place since early May.
USD drops after US jobs report
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 29 June – 3 July
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
