Foreign exchange trading reminder on October 8: Market risk appetite is heating up, U.S. Treasuries fall, commodity currencies rise

The U.S. dollar remained stable against a basket of currencies on Thursday (October 7). The U.S. labor market data to be released on Friday may provide clues to the timing of the Fed’s next move. Most major currency pairs are trading in the near-term range. Members are unwilling to bet heavily before the data is released.

The dollar index was flat at 94.21, not far from the one-year high of 94.504 hit last week. The number of initial jobless claims in the United States declined last week, but the number of layoffs in September rose from a 24-year low, partly because hospitals fired unvaccinated employees and a lack of workers forced some facilities to close.

Michael Brown, a senior analyst at the payment company Caxton, said that today's market is quite typical of the dull before the release of non-agricultural employment data. I think that until the employment report is released, we may have been stuck in a range like this, but even then, considering that the reduction of quantitative easing in November looks almost certain, any weakness in the dollar should subside.

As the momentum for the shift from the pandemic crisis policy has increased, the Fed has stated that it may start reducing monthly bond purchases as early as November, and will raise interest rates afterwards.

Institutional surveys show that the non-agricultural employment data to be released on Friday is expected to show continued improvement in the labor market, with 455,000 new jobs expected in September.

Strategists said that if the number of non-agricultural employment is less than 200,000, it may lower downsize expectations, which in turn will cause US Treasury yields to fall. Bank of America strategists said that if non-agricultural employment data is expected to be better than expected, the dollar will rise against the euro and against the Swiss franc.

Mark Haefele, chief investment officer of UBS Global Wealth Management, said in a report that the steadily improving labor market and steady economic growth in the United States should give the Fed the green light to reduce its quantitative easing program.

A foreign exchange strategist at Bank of America Global Research said in a report that in the week after the non-farm payrolls report was released, the U.S. dollar tends to reverse most of the rise or fall since the day the report was released.

The euro performed poorly, with the euro falling 0.03% to 1.1552 against the dollar; long-term large investors and option accounts bought the euro, while speculative accounts were basically on the sidelines, and hedging activities around 1.564 affected the exchange rate level. Two European traders said that there is a large euro sell order at 1.1580-00, and there is a buying order for the euro against the Swiss franc at 1.0700 and above.

Safe-haven currencies led the decline; the Japanese yen bottomed out, with approximately $2.6 billion options with a strike price of 111.00 that will expire on Friday.

Risk-sensitive currencies rose on Thursday. On the eve of the release of the key US non-farm payrolls report, the US debt ceiling impasse showed signs of easing, and concerns about energy tensions in Europe have cooled, improving market risk appetite.

The pound rose 0.27% to 1.3619 against the dollar, as global risk sentiment slightly improved. Analysts said that the prospect of a rate hike by the Bank of England reduced some of the pound's downside potential.

The Australian dollar led the gains, and the Australian dollar rose 0.55% to 0.7312 against the US dollar; boosted by earlier exporter demand and offshore buying of Australian Treasury bonds, large-scale investment sales in the medium and long term slowed the Australian dollar’s gains; iron ore hit two weeks The biggest increase has come. Kenneth Broux, a strategist at Societe Generale, said that the Australian dollar is cheap and the economic restart means that theoretically, the Australian dollar can regain some of its lost ground after a terrible third quarter.

As oil prices rebounded sharply, the U.S. dollar fell 0.39% against the Canadian dollar, setting a new one-month low to 1.2550; the New Zealand dollar rose 0.16% to 0.6925 against the U.S. dollar.

Friday preview

time	area	index	The former value	Predictive value
07:50	Japan	August trade account (100 million yen)	6223	-3853
09:45	China	September Caixin Service Industry PMI	46.7	49.2
14:00	Germany	August unadjusted trade account (100 million euros)	181	150
20:30	America	After seasonal adjustment of non-agricultural employment population changes in September (10,000)	23.5	48.8
20:30	America	Annual average hourly wage rate in September (%)	4.3	4.6
20:30	America	September unemployment rate (%)	5.2	5.1
20:30	America	After the seasonal adjustment of the changes in the employment population in the manufacturing industry in September (10,000)	3.7	2.5
20:30	America	September labor participation rate (%)	61.7	61.7
20:30	America	Changes in the number of non-agricultural employment in private enterprises in September (10,000)	24.3	45
20:30	Canada	September unemployment rate (%)	7.1	6.9
20:30	Canada	Changes in the number of employees in September (10,000)	9.02	6
22:00	America	Final value of monthly rate of wholesale inventory in August (%)	1.2	1.2
01:00 AM	America	The total number of wells drilled in the United States for the week as of October 8 (ports)	528	535
01:00 AM	America	The total number of oil rigs (mouth) for the week ending October 8	428	433

Summary of Institutional Views

Commerzbank: The pound will fall further against the dollar

Commerzbank's technical analysis still predicts that the pound will fall further against the US dollar. The Elliott wave pattern is still negative in the intraday. The current trend is down. On the upside, the initial resistance is located at the high of 1.3752 on September 23, and the 55-day moving average 1.3758 thereafter. And the mid-September high of 1.3914, as long as it is blocked below 1.3914 to maintain a bearish tendency, it will fall to 1.3161 where the 200-week moving average is located, and the recent low is at 1.3411.

United Overseas Bank: The Reserve Bank of New Zealand may stand still in November

UOB believes that the Reserve Bank of New Zealand may avoid taking action on policy interest rates at its meeting in January next year and resume its interest rate hike cycle in February (and May). As expected, the Reserve Bank of New Zealand decided at its October meeting to The official cash rate was raised to 0.50%. Earlier, at the meeting, it was expressed that we would prefer to adjust the interest rate when the monetary policy statement is issued. Looking ahead, we are cautious about the speed of interest rate hikes, although the decision this month is expected to be a series of decisions by the Federal Reserve Bank of New Zealand next year. The first of the interest rate hikes is that the Fed’s forecast for a rapid rate hike before 2022 is too optimistic; the Reserve Bank of New Zealand will also hold a meeting in November. For now, it is expected to keep interest rates unchanged in November because The Fed has "taken off" from record lows and is now more willing to maintain choice. Any further tightening may be carried out in a small and stable manner.