Dollar May Have Missed Its Last Chance To Take Out Resistance On A NFP Disappointment

Though there were fully eight independent, upper echelon indicators scheduled for release this morning, the dollar failed to make a break during the data flow. Now with the calendar clearing up for the week ahead, natural market forces will have to push the currency out of limbo without the aid of a momentum-unifying key indicator.

Following the charts, all of the same major levels are still in place. EURUSD saw a burst of activity in the US session that tore the pair from its 10-point, overnight range and put it into a dive to 1.3390. The hopes for a clean break below serious support at 1.34 evaporated when the pair retraced most of its gains. The pound was able to hold its ground against dollar fluctuations this morning as GBPUSD cut a volatile range between 1.9765 and 1.9820. For the carry-attractive pairs, the greenback?s gains were a little stickier. USDJPY steadily rose to take out 122, though considerable resistance was eyed in the 122.20/40 zone. Finally, USDCHF was already on its way to making a big double top at 1.2330 and US session action just moved things around from there.
A considerable opportunity was squandered this week. Two consecutive sessions packed with big name economic indicators had raised the bar for potential market action, all while the dollar was positioned at a technical cliff. Today?s calendar was the second chance to get things going; and most were banking on a big move after the nonfarm payroll report. However, the gauge let traders down when it printed a stable figure near economists? consensus. According to the Labor Department, 157,000 American?s found employment in May -modestly above the 132,000 expected. For policy makers, the steady additions to payrolls and consistently low jobless rate are optimal for stable interest rates. On the other hand, the April revision was once again to the downside, which is the third consecutive month after two years of positive adjustments. Looking back at price action following the NFP numbers through this year, the average move has been relatively tame compared to previous years. If these conditions continue, the monthly employment figure may fall out of favor with short-term traders and be cut from top market mover lists.
Though the NFP data was uneventful, the other consumer-related indicators were putting printing notable changes. Average hourly earnings for the year through May accelerated for the first time in five months when it rose to a 3.8 percent pace. The personal spending and income data for the previous month was a little more exciting. Offering a lagging report to today?s earnings data, personal income dropped 0.1 percent in April - the first contraction since August of 2005. In contrast, the growth and inflation supportive personal spending number for the same period actually jumped 0.5 percent. Given the dip in the PCE numbers, spending trends may be secure even if income remains flat. The Fed?s favored inflation gauge decelerated on an annual basis through April to a one-year low 2.0 percent pace - notably right in line with the central bank?s target. Should the FOMC?s expectations for a rebound in growth fall apart, current conditions could allow for a rate cut with little cry of foul for inflation.
Undoubtedly, the NFP release was the center of attention for the day. However, the markets had one last chance at the elusive big break in the ISM manufacturing survey. Like the payroll number, the factory survey has commanded the top market moving spot in the past. Also like NFPs, the ISM gauge has fallen from grace as it bottoms out as factory activity rebounds as businesses look to restock inventories. For May, the national business activity indicator rose to 0.3 points to 55.0 against expectations of a 0.7 percent decline. A one-year high, but altogether another meager change. Looking ahead to next week for guidance on price action, there are few noteworthy economic reports scheduled for release; so the dollar may slowly give up its hard-earned gains as ranges stay in place.
Just as the dollar ultimately disappointed those looking for a pivotal decision in direction, equity markets once again fell short of supplying big follow through for all-time highs. From the benchmark indices, the Nasdaq Composite led the day with a 0.47 percent advance to 2,616.84 by 15:05 GMT. At the same time, the S&P 500 was up 0.3 percent at 1,535.20 while the Dow was added 0.11 percent to 13,643.24. And though the broad market was rather buoyant, many of the day?s outliers were actually losers. Brocade Communications Systems? shares dropped 5.3 percent to $8.71 after reporting a 98 percent drop in second quarter net income. To balance things out, large-cap Dell?s shares rose 2.7 percent to $27.64 after announcing a small dip in quarterly earnings and a 10 percent cut in the firm?s workforce.
Debt traders were pleased with the mix of modestly better growth data and stable inflation numbers that may help to defer the ‘inevitable? rate hike even further. By 15:03 GMT, the ten-year note was trading 11/32nds lower at 96-19 as its yield jumped 5 basis points to 4.935. The thirty-year note was off 14/32nds while its long-term yield added only 3 basis points to 5.040.