The day started with US yields down marginally after overnight saw the 30-year bond yield touch 5.0% (at 5.01%) before buyers came in and pushed the yield lower. The yield reached the highest level since August 2007 before retreating..
The 10-year yield reached 4.884% and likewise backed off those elevated levels. For the 10 year, it reached its highest level since July 2007.
The ADP employment data showed weaker-than-expected job growth, but the correlation to the more watched nonfarm payroll report – scheduled for Friday – is sketchy (although last month’s 180K was near the nonfarm payroll 187K number). ADP came in at 89K versus 154K estimate.
Later the services PMI data came in near expectations but new orders and employment both were less than last month, with the new orders particularly worrisome.
The data helped to keep yields in check and lower on the day.
Meanwhile, sellers in crude oil started to pile on. Oil prices plummeted, with WTI falling below $85 (to a low of $84.21). The decline came despite a lower US dollar and draw down in crude inventories of -2.2 million barrels versus a draw of -446M estimate. Admittedly, there was a net build of 5.2 million bbl in the products. OPEC+ confirmed no changes to its output policy during the JMMC meeting with Saudi Arabia extending its 1 million BPD supply cut until the end of 2023. Russia will maintain its 300k BPD export cut until year’s end. Nevertheless, crude prices are trading down -5.6% and $84.39 going into the end of day. Suddenly crude prices are at September 1 levels, below the August 10 swing high at $84.85, and a full $10 off of the $95 high price reached just 5 days ago. If oil prices have reached their high, and are able to extend the decline below $82.35, that may start to ease inflationary concerns a bit.
Lower yields gave the stocks a boast with the NASDAQ index being the biggest beneficiary. It rose 1.35% in is now 0.13% higher on the week. The S&P index rose 0.81% and the Dow industrial average rose 0.39%. However both still remain negative on the week with the S&P index down -0.57%. A lower close this week would be the 5th consecutive week where prices close lower. The Dow industrial average was working on its 3rd week in a row lower, and is currently down -1.13%. Much will depend on Friday’s nonfarm payroll report.
The strongest to the weakest of the major currencies
In the Forex market, the GBP is ending as the strongest of the major currencies. The CAD is the weakest (helped by the tumbling oil prices). THe USD is also mostly lower with gains only vs the CAD and a small 0.06% gain vs the JPY.
Looking at the GBPUSD, it reached a new low going back to March 16 (at 1.20362), and in the process moved further away from the broken 38.2% retracement of the move up from the 2022 low at 1.20763 in the process. However, could not sustain the momentum and reversed higher. On the rebound, sellers did show up near its 200-hour moving average currently at 1.21634. The price rotated lower from there, and is closing below its lower 100-hour moving average at 1.21424 (the current price is at 1.2134). In the new trading day if the buyers are to take more control, getting and staying above the 200 hour moving average at 1.21634 is required.
The EURUSD moved higher in the early US session but found resistance against the 50% midpoint of the move down from last week’s high at 1.05326. The rotation lower, came down to test key support on the daily and hourly chart at 1.0483 (see video here outlining the levels importance). The price bounced higher but found willing sellers against its 100-hour moving average of 1.05205. The current price is trading at 1.0505. In the new trading day, the 100-hour moving average needs to be broken and remain broken to give the buyers more hope. Above that the 50% at 1.05326 and the falling 200-hour moving average at 1.05481 are the next upside target.
For other technical videos for the major currency pairs: