Haven picks Japanese Yen and Swiss Franc rallied as risk aversion rose, lifting the VIX (Volatility Index +5.3%). Mounting trade war concerns as well as protracted EM weakness weighed on market sentiment. The US Dollar eased heading into August Payrolls after the ADP National Private Employment report increased less than expected. Stocks fell, treasuries rose, yields dropped.

Outlook: Despite US Jobless Claims to hit a post 1969 low, private jobs numbers underwhelmed. The softer than expected private sector employment result undercuts analyst’s forecasts of an increase in August Payrolls. Watch Wages data tonight, they also matter. US ISM Services PMI beat forecasts.
Australia’s Trade Balance in August bettered analyst’s expectations. German Factory Orders fell.

Trading View: “Let’s get ready to rumble!” Michael Buffer’s trademark catchphrase says it all. It’s Friday, Payrolls day.Jobs Creation for August is expected to be around +190,000 from Julys modest +157,000. Average Hourly Earnings (Wages) are expected to ease from the previous month.

The fall in stocks saw Treasury prices rise and yields fall. The yield on the benchmark US 10-year treasury fell 3 basis points to 2.87%. Germany’s 10-year Bund yield slipped to 0.35% (0.38%). The yield on Japan’s 10-year JGB was flat at 0.10%.

Emerging Market stocks extended their fall while most currencies settled. The Dollar eased against the offshore Chinese Yuan (CNH) and South African Rand (ZAR). USD/RUB (Russian Ruble) was higher. USD/TRY (Turkish Lira) was little-changed.

Uncertainty on the trade front continues with President Trump due to announce a fresh tranche of tariffs against China later today. Chinese trade data is due out over the weekend. Look out!
Amidst all of this, current market positioning is still overbought US Dollars. Which is looking tired. Traders would need a much better-than-forecast Payrolls to re-invigorate the Greenback.

USD/DXY – The Dollar Index eased 0.09% to 95.022 at the New York close from 95.129 yesterday. Overnight low traded was 94.933. Immediate support lies at the 94.80/90 level followed by 94.40/50. The overnight high traded was 95.208, which is where immediate resistance can be found. The next resistance level is at 95.50/60. Look to trade a likely range of 94.80-95.30 today pre-Payrolls.

USD/JPY – slumped 0.65% to 110.71 from 111.52 yesterday. The Dollar got smacked by a double whammy of a lower US 10-year yield and risk-off sentiment. Overnight low traded was 110.52 which was hit when reports that President Trump is looking to target Japan next in his trade crusade. The report was more the opinion of a Wall Street Journal writer. Immediate support lies at 110.50 followed by 110.20, then 109.80. Immediate resistance can be found today at 111.00 followed by 111.30. The Yen has stayed relatively weak in the current environment but the rise in risk aversion and higher VIX could see Yen strength re-emerge. Watch this currency. Likely range today 110.40-111.10 before Payrolls. Prefer to sell rallies.

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