“Boring” Fed and markets await NFP

Overnight Headlines

*USD modestly higher above 90 in choppy trade  

*US equities closed in the green, ASX climbs to all-time highs

*Brent trading at highest levels since May 2019

US equities closed higher with energy stocks the biggest winners, but no styles were stand out. All Asian markets are higher with Korea leading the gains while US futures point to a very muted, green open as all eyes are firmly on tomorrow’s US labour market report.

USD rose in the morning session before falling away afterwards and closing largely flat on the day, with EUR/USD remaining stuck around 1.22 and GBP/USD above 1.14150. US bond yields eased below 1.60% but continue to compress.

Market Thoughts – More taper comments, some clues to NFP

US private payrolls due later today may offer some hints on the state of the job market and a possible read on the monthly NFP report due tomorrow.  That said, the ADP report is rarely a good indicator, as much as it grabs the headlines for a short period of time. We also get ISM non-manufacturing with the employment and prices component being watched.

Along with comments last week from more influential Fed member Clarida and board member Quarles, the Fed’s Harker added to the “time for taper” talk overnight, although he added the caveat that “we will remove accommodation carefully and methodically…our goal here is to be boring”. Enough said really as bond yields didn’t move an inch, though the chorus is getting louder.

Chart of the Day – No bid holding in AUD/CAD

This week, AUD/CAD has threatened to break the trend resistance from the April high but so far that bearish trendline is holding and AUD again remains better offered amid the longer-term downward channel. Cycle lows at 0.9297 are within touching distance with the November 2020 trough at 0.9299 offering a support zone here. If the bears get through here, then the October 2020 lows around 0.9248 will appear quickly. Much may depend on the Canada (and US) job reports tomorrow.

Jamie DuttaAnalyst / Trader

"With extensive experience as a full time trader and financial market commentator, I have worked as a trader in top tier investment banks and trading houses, including Morgan Stanley and GAIN Capital trading Forex, Index derivatives. and Bonds. I combine technical analysis with a deep fundamental knowledge to identify trade set-ups. My real life experience allows me to break down the complexities of financial jargon and trading. This means everyone can better understand the compelling forces of greed and fear which are realised every day in countless ways across markets."

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