The US Dollar just can’t take a trick – what next?

May 5, 2014

If you had of asked me what I thought about a result of +288,000 for April non-farm payrolls might be late last week I would have said the US dollar will roar. And it did initially after what was the strongest print since January 2012 and way above the markets 210,000 expectation. The unemployment rate fell to a five and a half year low of 6.3% but this was partly due to less people in the workforce which took some gloss off the number.

But after an initial surge in the USD which drove the Aussie under 0.91 cents and the Euro to the low 1.38 region the dollar was chased back very aggressively and the message for the moment is clear – the market just does not want to be bullish US dollars.

Frankly I don’t understand it on a fundamental basis but the market is the market and it is telling us much.

Looking at the Aussie the rally is remarkable in the run up to tomorrow’s RBA board meeting and the fact that they might say something about the continued strength in the Aussie.

The chart shows that a solid recovery and a very long tailed daily candle. Key now for a run higher is how the Aussie looks above 93 cents in the next day or so.

Looking at the US dollar more broadly it is difficult to be bullish now and perhaps only a “surprise” from the ECB this week will get things moving back in the US dollars favour because at the moment it just can’t take a trick.

Turning back to Friday at the close the Dow fell 0.28% to 16,513, the Nasdaq fell a smidge or 0.08% to 4,124 while the S&P 500 dropped just 3 points or 0.14% to 1,881. On the week Craig James from CommSec says the Dow and S&P both posted healthy 0.9% rises while the Nasdaq was 1.2% higher.

In Europe the  increased tension in the Ukraine and what looks like an inexorable slip toward civil war. 40 people died in a huge conflagration in Odessa and tension in the East also increased. Ukraine violence of course then weighed with Continental stocks except for Spain lower. In Britain the FTSE was 0.19% higher at 6,822. The DAX fell 0.49%, the CAC fell 0.65% to 4,458 while the FTSE MIB in Milan was flat. Spanish stocks eked out a 0.15%.

Locally the SPI 200 rose 7 points in weekend trade to 5452 bid suggesting a stronger open again today.

On currency markets as noted above the US dollar was doing well in the lead up to the non-farms data and then afterwards with the Aussie falling to a low of 0.9193 before rallying a full cent as the US dollar was hammered. It sits at 0.9290 this morning with Reuters reporting it has traded as high as 0.9311 this morning. Euro is also high at 1.3882 and the pound is sitting at 1.6876. USDJPY is at 102.16.

On Commodity markets Gold bounced strongly as the USD fell and Ukraine raised tensions and is up almost $20 oz for a gain of around 1.5% to $1,297. Nymex crude sits at $99.99 Bbl and likely with an upside bias if the Ukrainian situation gets worse. Copper bounced strongly to $3.08 lb while the Ags were volatile again with corn down 1.74% while wheat rose 1.29% and soybeans were 0.49% higher.

On the data front we get the TD inflation data today along with the AiG PSI, ANZ Job Ads and building approvals as well as the HSBC Services PMI data before the Sentix investor confidence survey in the EU along with EU PPI and then ISM Services in the US.

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