The day started with US yields slightly lower. After the 30-year bond yield reached 5.0% (currently 5.01%) overnight, buying pushed yields lower. Yields hit their highest level since August 2007, but have since fallen back.
The 10-year Treasury yield reached 4.884%, retreating from a similarly elevated level. This is the highest level in 10 years since July 2007.
The ADP jobs report showed weaker-than-expected job growth, but the correlation to the more closely watched non-farm payrolls report scheduled for Friday is unclear (although last month’s The figure of 180,000 was close to the number of non-agricultural employees of 187,000). ADP was 89,000 versus an estimate of 154,000.
After that, the service industry PMI statistics were close to expectations, but new orders and employment were both lower than the previous month, raising concerns about new orders in particular.
This data helped keep yields in check and lower on the day.
Meanwhile, the number of crude oil sellers has also begun to increase. Oil prices have fallen sharply, with WTI below $85 (lowest price was $84.21). This decline occurred despite a weaker U.S. dollar and crude oil inventories of minus 2.2 million barrels, compared to an expected minus 446 million barrels. Indeed, the net production of the product was 5.2 million barrels. At the JMMC meeting with Saudi Arabia, OPEC+ confirmed the extension of the 1 million BPD supply cut until the end of 2023 and confirmed that there will be no change in production policy. Russia will maintain export cuts of 300,000 BPD until the end of the year. Nevertheless, oil prices were down -5.6%, or $84.39, by the close of trading. Suddenly, oil prices were at their September 1 level, below the August 10 high of $84.85 and down $10 from the high of $95 just five days earlier. If oil prices reach their all-time high and can extend their decline below $82.35, inflation concerns may start to ease a little.
The drop in yields has added to stock prices with the Nasdaq index being the biggest beneficiary. It rose 1.35% for the week and is currently up 0.13%. The S&P Index rose 0.81%, and the Dow Jones Industrial Average rose 0.39%. However, both still have negative weeks, with the S&P index down -0.57%. If the stock closes lower this week, it will be the fifth consecutive week of closing at a lower price. The Dow Jones Industrial Average has been trending lower for the third consecutive week and is currently down -1.13%. Much will depend on Friday’s nonfarm jobs report.
From the strongest to the weakest of the major currencies
In the foreign exchange market, the pound is ending up as the strongest of the major currencies. The Canadian dollar is the weakest (helped by falling oil prices). The US dollar also appreciated only against the Canadian dollar and was mostly down against the yen, gaining only 0.06%.
Looking at GBPUSD, it reached a new low dating back to March 16th (1.20362) and in the process moved further away from below the 38.2% retracement of the rally from the 2022 low of 1.20763. However, the momentum could not be maintained and it reversed upwards. On the rebound, sellers have now appeared near the 200-hour moving average at 1.21634. The price started to decline from there and ended below the lower bound of the 100-hour moving average at 1.21424 (current price is 1.2134). For buyers to gain more control in the new trading day, the bulls need to capture and sustain above the 200-hour moving average of 1.21634.
EURUSD rose in early US trading, but resisted the midpoint of a 50% decline from last week’s high of 1.05326. Rotation fell to test the major support on the daily and hourly charts at 1.0483 (see here for a video outlining the significance of the level). Prices rose but found motivated sellers against the 100-hour moving average of 1.05205. The current price is trading at 1.0505. In the new trading day, it should break and remain above the 100-hour moving average to give buyers more hope. Above that, the next upside targets are 50% at 1.05326 and the falling 200-hour moving average at 1.05481.
For more technical videos on major currency pairs, see below.
