Yen was once again sold off broadly last week, following late rally in treasury yields despite disappointing US job report. Resilience in overall risk appetite also kept the Japanese currency pressured. Meanwhile, Euro followed as as distant second worst on selloff in crosses, as well as Dollar. New Zealand Dollar’s weakness was a surprise as RBNZ did deliver the anticipated rate hike.
On the other hand, Canadian Dollar jumped as the strongest, following both solid employment data and extended rise in oil prices. Australian Dollar was also helped by rally in coal price, even though RBA is set to lag behind major counterparts in exiting stimulus. Sterling was the third strongest one, on speculation that BoE could be forced to hike interest rate sooner.
10-year yield surged past 1.6 as traders added to Fed hike bets
Despite disappointing non-farm payroll data, there was basically no change in expectations that Fed is on track to start tapering later this year. Indeed, traders continued to add bet on a Fed hike by the end of next year. Fed funds futures are pricing in less than 20% chance of Fed keeping interest rate at 0-0.25%, comparing to over 46% a month ago.
10-year yield also surged to close the week strongly at 1.605 as rise form 1.128 resumed. Further rise is expected as long as 1.463 support holds. TNX should target a test on 1.765 high in the near term. For now it’s still unsure if upside momentum in TNX is able to push it through 1.765 to resume larger up trend from 0.504. That could very much depends on upcoming inflation data, and thus Fed hike speculations.
NASDAQ defended key support as stocks showed resilience
Stocks were also resilient last week. NASDAQ defended 14175.11 support and rebounded. Current development argues that the corrective pattern from 15403.43 is a relatively shallow one only, even if it’s going to extend. Sustained trading above 55 day EMA would pave the way to retest this high. However, firm break of 1415.11 support would argue that NASAQ is already is a deep medium term correction, that should target 13002.53 structural support and possibly below.
Dollar index still struggling to break through 94.46 fibonacci level
Dollar index continued to struggle to break through 38.2% retracement of 102.99 to 89.20 at 94.46 decisively last week. Dollar is partly supported by surging yield by capped by resilient risk appetite. For now, further rise is still in favor in DXY as long as 55 day EMA (now at 92.99) holds.