The disappointing non-farm payroll report triggered a pull back in the greenback last week but Dollar quickly recovered and ended the week mixed. Dollar index has indeed ended the week higher at 95.88, above prior week's 95.48, and gained 0.23 points on Friday. That's thanks to buying against Euro and Yen even though Dollar ended lower against commodity currencies. Yen ended as the weakest major currency on expectation of BoJ easing in September. Stocks also closed the week mildly higher with DJIA ended at 18491.96 while S&P 500 closed at 2179.98, staying in recent range. In other markets, 10 year yield failed to extend gain and pull back to recent range, ending at 1.596. Gold reversed earlier losses and closed the week higher at 1328.8. WTI crude oil also recovered but ended the week lower at 44.44.
Non-farm payroll showed 151k growth in August, below expectation of 188k. Prior month's figure was revised up from 255k to 275k but couldn't make up the short fall. Unemployment rate was unchanged at 4.9% versus expectation of a fall to 4.8%. Meanwhile, wage growth was particularly disappointing. Average hourly earnings rose 0.1% mom in August, below expectation of 0.2% mom and slowed from prior month's 0.3% mom. Fed fund futures are pricing in 21% chance of September hike, dropped from prior day's 24%. Chance of December hike also dropped to 50.6%, down from prior day's 53.6%.
The market pricing showed that traders are still expecting another hike by Fed this year even though it may not be September. After the released, Richmond Fed president Jeffrey Lacker also said in a speech that "unless employment growth slows significantly in the months ahead, it will continue to push our benchmark interest rates up." It should also be noted that there are talks that Fed will hold fire before presidential elections in November. Hence, the mildly disappointing NFP just affirmed the view that Fed will only hike later in the year.
Taking a look at the dollar index, the quick rebound on Friday suggests that rebound from 94.07 is still in progress for 97.56. However, we'd maintain that the price actions from 91.91 are corrective looking. Also, it's being bounded by a near term rising channel without sign of upside acceleration. And thus, it could just be part of the whole consolidation pattern from 100.39. We'd be cautious on strong resistance above 97.56 to limit upside. And sustained trading above 97.56 is needed to confirm the momentum for 100.51 high.
Regarding trading strategies, we're holding on to EUR/AUD long, bought at 1.48, with stop at 1.4650. We maintain the view that fall from 1.5644 resistance has completed at 1.4404 and a break of 1.4905 resistance is expected at a later stage. Meanwhile, our USD/JPY long order wasn't filled as the pull back was shallow. As for new strategies, firstly, we'd expect further Yen weakness on expectation of BoJ easing. Secondly, Dollar's rebound against Euro gives that greenback a slight upper hand. Meanwhile, we're skeptical on the sustainable strength of rebound in commodity currencies. Thus, we'll try to buy USD/JPY again this week on retreat to 102.50.