Friday August 6th, 2021

The US$ strengthens, oil prices rebound, while equity markets and US yields are mixed ahead of the US jobs data today. The Nonfarm Payroll for July is expected at 870k which would be a robust number and an increase from June’s 850k. The jobs number will be a key driver to markets with analysts’ estimates ranging widely from 350k to 1.2mio and the potential for increased US$ volatility is high if NFP is outside expectations. A strong NFP number would strengthen the US$ on expectations that the Fed could act sooner on tapering. In other news, The US Senate is expected to try to finish the US$1T infrastructure bill on Saturday. Sino/US tensions continue as the US offers ‘safe haven’ to HK residents in the US after the China crackdown. A Reuters poll estimates China’s export & import growth will likely moderate in July due to rising covid cases and continuing pressure on global supply chains. US trade groups urge President Biden to restart trade talks with China. Covid, In the US Dr Fauci warns more severe covid variant could emerge as US cases near 100k daily. In Australia, the Delta variant spreads in Sydney reaching record infections for a 2nd day prompting increased restrictions. China records their highest daily covid cases in +3-months. In currency markets, the US$ retests weekly highs ahead of the US Nonfarm Payrolls. The CNY remains trapped in a tight trading range vs US$ as investors continue to wait for clearer policy guidance. CNY and Asian currencies dip 0.1% on average vs US$. Trading currencies are under pressure with JPY & MXN are down 0.05%, AUD & ZAR dip 0.15%, NOK weakens 0.25% while NZD is flat vs US$. US Jobs data will dictate intraday direction.

Oil prices firm but remain set for its biggest weekly loss since October as covid related demand worries continue to keep oil prices under pressure. C$ opens near its weekly highs after posting a C$3.2billion trade surplus in June highlighting Canada’s economic recovery. The US jobs data will be the primary driver for the loonie today and expect the potential for high C$ volatility if the job’s number is outside of expectations. Alongside US NFP, CAD Unemployment Rate, Net Change in Employment, and Ivey PMI will provide intraday direction for the loonie. Support resets to 1.2475, while resistance sits at 1.2540, if breached look for 1.2605. 

Euro continues to drift lower, breaching 1.1850 and retesting 1.1800 vs US$. Euro remains under pressure after hawkish Fed comments this week and on expectations of a robust US jobs number for July. In the bigger picture a weaker Euro suits the ECB in helping facilitate a stronger export-driven economic recovery. Expect Euro to be contained at current levels until 8.30EST NFP release. Support holds 1.1795, if breached look for 1.1702 support next (Mar 31st) while resistance remains at 1.1900.

EURGBP holds near 4-month lows after the BoE hawkish comments and falling UK covid cases, both increasing support for the pound. Support resets to .8495 Apr 5th (1.1770) with resistance remaining at .8600 (1.1628).

GBP holds about 1.39 heading into the US NFP data after the hawkish BoE outlook. The BoE took initial steps towards tightening its policy as the economy rebounds and covid cases continue to fall. The pound received an extra boost after the BoE Governor said he is ready to act if the current rise in inflation has secondary effects such as pushing prices higher. Today NFP will dictate intraday direction, but bias remains positive for GBP longer term. Support holds at 1.3890 while minor resistance at 1.4010, if breached we could extend to 1.4132 (Jun16th).