May 2 (Reuters) –Despite a cluster of bullish but second-tier U.S. data out Thursday, the dollar remained on the back foot — along with Treasury yields — following a less hawkish than expected Fed meeting in the previous session and ahead of top-tier U.S. jobs and ISM data on Friday.
Leading the dollar’s pullback was another suspected bout of yen intervention late Wednesday. USD/JPY‘s rebound off Wednesday’s 12-day low at 153 to 156.26 steadily eroded with 0.77% fall on Thursday.
Strategically timed interventions now appear to be an ongoing threat after Monday’s 160.245 peak was flattened ahead of 1990’s 160.35 high.
In a market coming off its second largest ever net spec long position and extremely bearish divergences from daily and weekly RSIs, this suggests bulls may need help from Friday’s U.S. jobs and ISM non-manufacturing data.
And those who bought April’s breakout above 2023 and 2022 highs by 152, the prior intervention trigger point, will want to see that level hold.
EUR/USD erased earlier losses linked to Thursday’s below-forecast jobless claims, 4.7% surge in Q1 unit labor costs and 4-month low in Challenger layoffs after Treasury yields more than reversed earlier gains. That as Wednesday’s curve steepening rise in Treasury yields following Chair Jerome Powell’s pushback against the likelihood of rate hikes also faded.
But EUR/USD remains in a 7-day range clustered around the 1.07 level.
Currently the market is pricing in a likely Fed rate cut in September, with 39bp by year-end, up from intraweek sub-30bp lows, but miles from the six rate cuts priced in January.
The ECB is more highly favored to cut at their June 6 meeting, with 66bp of cuts priced in by year-end.
The BoJ is only seen offering the yen a modicum of rate hike support to the tune of 20bp by year-end, with no indication yet of when QE will end.
Sterling rebounded from Thursday’s 1.2469 low by the 10-day moving average to about flat on the day. The BoE’s first rate cut is largely priced in for August, with 48bp of cuts by year-end.
The broader FX focus is on Friday’s U.S. data and inflation updates thereafter to gauge whether or not the top in Fed tightening, Treasury yields and the dollar were witnessed in April.
April non-farm payrolls are forecast at 243k versus 303k in March, the jobless rate is seen steady at 3.8% and average hourly earnings are expected up 0.3% again. If near forecast, that data would reaffirm a still strong labor market. The much broader ISM non-manufacturing index is forecast at 52 from 51.4 in March.
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Editing by Burton Frierson
Randolph Donney is a Reuters market analyst. The views expressed are his own.
