TALKING POINTS – US DOLLAR, YEN, PAYROLLS, NEW ZEALAND DOLLAR
- New Zealand Dollar inexplicably drops vs G10 FX in late APAC trade
- US Dollar, Yen may rise on haven demand if US jobs data disappoints
- S&P 500 chart positioning hints at broad-based risk aversion ahead
Most major currencies languished in narrow ranges in Asia Pacific trade, with traders seemingly unwilling to commit to a firm directional bias. Claims of progress in US-China trade talks offered a bit of a lift to the Australian Dollar but a genuine risk-on swell failed to materialize. The British Pound corrected gently higher following the prior day’s decline.
The New Zealand Dollar was a notable standout. The currency plunged to a two-month low against an average of its major counterparts in the latter half of the session. A clear-cut catalyst accounting for the decline is not readily apparent at the time of writing. That might imply a one-off that ultimately struggles for follow-through, but making a convincing argument one way or another is tricky for now.
US JOBS DATA MAY SOUR MARKET MOOD
From here, the spotlight turns to US employment data. It is expected to show that the pace of job creation perked up in March, with a 177k rise in payrolls following February’s dismal 20k increase. The unemployment is seen holding unchanged near 50-year lows at 3.8 percent while wage inflation is forecast to print at 3.4 percent, matching the decade high set in the prior month.
US economic news-flow has increasingly deteriorated relative to baseline forecasts in recent months, which may set the stage for a downside surprise. With the Fed sidelined through year-end by its own admission, sentiment trends may be the outlet for such an outcome. It may stoke global growth fears and trigger risk aversion, boosting the US Dollar and Yen while weighing on cycle-linked commodity currencies.
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CHART OF THE DAY – S&P 500 CHART WARNS OF RISK-OFF TURN AHEAD
The bellwether S&P 500 index has clawed its way up to a six-month, but negative RSI divergence warns of ebbing upside momentum. That might mean that a reveral lower is brewing ahead. Such a move is likely to mark broader risk aversion across global financial markets. Confirmation of a lasting reverasl needs a daily close below rising channel support, now at 2796.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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