FX Update: Safe havens on the defensive ahead of US jobs data. FX Update: Safe havens on the defensive ahead of US jobs data. FX Update: Safe havens on the defensive ahead of US jobs data.

FX Update: Safe havens on the defensive ahead of US jobs data.

Forex 5 minutes to read
John Hardy

Head of FX Strategy

Summary:  The USD could be set to pivot back lower here, ironically in particular if the US data proves in-line or stronger than expected. Indeed, yesterday’s strong ISM non-manufacturing suggested that the market is poorly positioned for positive data and could drive notable consolidation across all safe havens.

Trading interest

  • Maintaining AUDNZD longs with stops below 1.0570 for 1.0950
  • Long EURCHF around 1.0900 for 1.1000+ with stops below 1.0850
  • Short EURSEK around 10.69 with stops above 10.75 for low 10.50’s target

Please have a listen to today’s Market Call podcast, in which we discuss important themes driving the shift in risk sentiment, the outlook for Fed expectations, bond market volatility and much more. A slide deck is also available.

The strong US August ISM Non-manufacturing survey yesterday further helped shift the narrative as the market was not only ill-prepared for a sudden thawing in the US-China trade tensions (however long it may last), but also not ready for a strong US data point: in yesterday’s case a 56.0 reading in the ISM Manufacturing. This was better than the 54.0 expected and 53.7 expected and a strong counterpoint to the weak ISM Manufacturing survey earlier in the week and helped drive a more notable consolidation in US treasuries, also taking down safe havens a couple of notches – most spectacularly in precious metals, but also seeing USD, JPY and CHF weaker.

Likewise, a strong US jobs report today could continue to drive discomfort with the market’s current positioning, seeing further consolidation in safe havens and driving a deeper recovery in riskier currencies. Remember over today’s payrolls change that increasingly over the coming year or so, census hiring will be a large factor in payrolls change figures, so have one eye on the private payrolls release as well. We believe the US recovery is very long in the tooth, but employment and earnings data badly lag the economy, so we’re not necessarily expecting anything negative to show up in today’s report.

The Russian Central Bank meets today and may be able to pull off the rate cut and see the RUB higher, given the risk sentiment improvement of the last couple of days.

EURCHF has traded heavily through thick and thin and a possibly dovish ECB may have some fretting the risk of further downside, but safe haven factors may be a more important driver in the near term. Further consolidation there – for example, bond yields backing up a bit, could finally drive a chunkier consolidation here than we have seen in a while. The first major resistance is the psychological 1.1000 area, but a mere 38.2% retracement of the entire last down-wave doesn’t come in until 1.1065.

Source: Saxo Bank

The G-10 rundown

USD – the USD under pressure here almost across the board (notably exception the JPY, which is even weaker) and good US data today could ironically help to continue to drive a weaker USD.

EUR – EURUSD bears uncomfortable if we can’t hold below yesterday’s close on the close of the week today, fears of a dovish ECB next Thursday notwithstanding.

JPY – traders fleeing safe haven on the recovery in risk sentiment, making the JPY one of the weakest currencies at the moment.  The 107.00 are in USDJPY is rather important for whether USD or JPY is weakest.

GBP – the latest idea for the parliamentary opponents to Boris Johnson is to aim for late October for  UK elections, while Johnson holds out hopes for the mid-October poll. GBP in a holding pattern.

CHF – the franc looks far too strong given where markets are otherwise – room for consolidation in EURCHF back to 1.1000-1.1100.

AUD – AUDUSD challenging the first important resistance around 0.6830 ahead of the US jobs report, but plenty of more wood to chop for a full chart reversal (closer to 0.7000 needed.)

CAD – more open minded for the potential to challenge 1.3000 if risk sentiment continues to improve from here.

NZD – upstart NZD has more room to run versus the USD before running into major resistance versus the USD – starting with 0.6485-0.6500 area.

SEK – the Riksbank helping SEK to the upside by maintaining its bias to hike, but the backdrop of improved sentiment doing the heavier lifting and a continuation of yesterday’s developments could help EURSEK finally put in a heavier consolidation, as far as 10.50.

NOK – EURNOK finding more separation from 10.00, but the sell-off doesn’t pick up more significance until working through 9.90 and really more like 9.80-9.75. The backdrop move away from safe havens is supportive here, as long as it lasts.

Upcoming Economic Calendar Highlights (all times GMT)

  • 1030 – Russia Central Bank Rate Decision
  • 1230 – US Aug. Nonfarm Payrolls Change
  • 1230 – US Aug. Average Hourly Earnings
  • 1230 – US Aug. Unemployment Rate
  • 1230 – Canada Aug. Employment Data
  • 1400 – Canada Aug. Ivey PMI

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.