USD loses ground on US payrolls

The greenback was firmly in focus on Friday as traders bid it higher heading into US jobs numbers.

Source: Bloomberg

US treasuries strengthened on Friday, with 10-year yields falling to 2.29% (down 9 bp) on the back of the payrolls release. Non-farm payrolls were up 214,000 in October, falling short of expectations of around 230,000. However, the unemployment rate actually fell to 5.8% and the previous two months were revised upwards by 31,000. Average hourly earnings also fell short at 0.1%. Equities were mixed on the back of the jobs numbers but the price action in treasuries and the USD suggests traders took the data as slightly dovish.

AUD likely to be sold into strength

The greenback lost ground to the majors with some interesting moves in AUD/USD. The pair managed to reverse from Friday lows – the lowest level since 2010 – and reclaimed the $0.8600 handle. After the recent, sharp sell-off, I was eyeing a near-term bounce in the pair and feel it’ll remain in focus as data is due out of China today.

We have China’s CPI and PPI set to be released at 12.30pm AEDT, with CPI expected to remain at 1.6%. Locally, we had home loans data which came in at -0.7%, worse than an expected -0.3%. I feel sellers will continue to consider selling into strength, particularly into the $0.8700 region. The 38.2% retracement of the 29 October-to-7 November drop comes in at $0.8620 and I feel it will be a key level in the near term.

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