AUD/USD, NZD/USD Gain. Japanese Yen May Rise as Week Gets Going

Asia Pacific Market Open Talking Points

• AUD/USD and NZD/USD gains as US Dollar sinks with bond yields
• US jobs report was rather disappointing, sending Wall Street lower
• The anti-risk Japanese Yen may strengthen as APAC stocks decline

US Dollar Falls After Jobs Report as AUD/USD and NZD/USD Rise

The best-performing major currencies on Friday were the pro-risk Australian Dollar and New Zealand Dollar. At first glance, that usually speaks to a broad upswing in market mood. That was however lacking as Wall Street ended the day decidedly lower. This was in the aftermath of the latest non-farm payrolls report from the United States which was a broadly disappointing outcome.

While the unemployment rate held steady in December, the country gained fewer jobs than expected. Average hourly earnings unexpectedly grew +2.9% y/y which was the slowest pace since the middle of 2018. All the while manufacturing jobs shrunk -12k versus +5k expected. This could be why the industrial-heavy Dow Jones fell -0.46% as the S&P 500 dropped -0.29%.

Local front-end government bond yields declined as the US Dollar weakened and dovish Fed expectations rose. Broad declines in the Greenback likely worked in the favor of the AUD and NZD from a competing yield perspective. It should be noted that the latter currencies gave up some of their gains towards the end of the day as Wall Street extended its slump. Sentiment-linked crude oil prices followed equities lower.

The most interesting currency I think was the Canadian Dollar which gave up all of its gains after a comparatively stellar local jobs report. Canada’s unemployment rate unexpectedly declined to 5.6% in December from 5.9%. The United States is its largest trading partner and fears of deteriorating economic health would probably mean adverse knock-on impact. That may have been why CAD finished little moved.

Monday’s Asia Pacific Trading Session

The new week begins on a relatively quiet note from a perspective of economic data. That arguably highlights risk trends as the key driver for foreign exchange markets during Monday’s Asia Pacific trading session. Regional bourses may follow the S&P 500 lower which could paint a rosy session for the anti-risk Japanese Yen. But will that be enough to reverse some of the gains in AUD/USD and NZD/USD?

Australian Dollar Technical Analysis

AUD/USD paused its near-term descent as prices bottomed at near-term support (0.6850). The long-term trajectory still seems to favor the upside with prices still sitting above former descending resistance from December 2018. The immediate psychological barrier above is a range between 0.6913 to 0.6939. In the medium-term, losses could pave the way to test a potential rising trend line from October.

AUD/USD Daily Chart

Chart Created Using TradingView

--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter