Payrolls puts greenback back in play

The main theme from Friday’s trade was renewed US dollar strength on the back of a strong September jobs report.

Source: Bloomberg

Jobs numbers essentially smashed expectations, with non-farm employment change coming in at 248,000, beating the consensus of 216,000. The unemployment rate dropped below 6% - a significant handle - to 5.9% (the bottom band of the Fed’s target).

There was also a 69,000 upward revision to growth over the previous 2 months. The minor negative in this was the fact average hourly earnings dropped off a bit – but this will eventually sort itself out as job creation continues to grow. Meanwhile, the trade deficit also dropped and services activity powered ahead, with the ISM non-manufacturing PMI coming in ahead of expectations. The US dollar index rallied to a high of 86.69 after the greenback gained significant ground against most of its major peers.

AUD/USD testing January lows

AUD/USD recovered to $0.8800 only for the selling to resume, and has since dropped to January lows in the $0.8660 region. In fact, AUD/USD traded to a low of $0.8643 before bouncing to close a touch above January lows.

However, the negative momentum has continued this morning and I wouldn’t be surprised to see the level seriously retested once again. A break below this will see the pair trade at its lowest since July 2010.

Tomorrow we have the RBA meeting, where little change is expected, but perhaps talk around the property market and the declining AUD will continue in the near term. The next key level for the pair is down to the $0.8500 region. China is closed today and that’ll limit activity around the region.

Click to enlarge

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.