US dollar reverses course post-NFP

Weak NFP sends dollar broadly lower

The US dollar fell heavily after a weaker than expected Non-Farm Payrolls on Friday. Although the US yield curve steepened, rises in yields in the long-end were offset by falls in yields at the short-end, making it US dollar neutral. The dollar index traced out a double top at 91.60 before falling 0.53% to 91.04, just above support at 91.00. A daily close below 91.00 probably moves the dollar index into a 90.50/90.25 range ahead of the US CPI data on Wednesday.

The US dollar fall was a welcome relief for the embattled euro. EUR/USD rose 0.73% to resistance at 1.2050 before retreating slightly. It has edged lower in Asia to 1.2038, but a close above 1.2050 should see the single currency grind through 1.2100 again over the next couple of sessions. The story was similar with the under-fire Australian dollar, with AUD/USD climbing 1.02% to 0.7675 on Friday, recapturing the pivot at 0.7625. AUD/USD will likely settle into a 0.7650/0.7100 range now, and I await more precise signals from the charts for clues to its next move.

USD/CNY moved slightly lower in Friday to 6.4665, falling again this morning to 6.4580 in line with the US dollar weakness seen in the DM currency space. That has allowed regional Asian currencies to strengthen modestly versus the greenback this morning. The PBOC remains intent on confining USD/CNY to a 6.4000/6.5000 range through the Lunar New Year holiday period, and that should leave regional currencies volatility muted as well.

In Asia, currency markets appear to have one foot out of the door for the holidays towards the end of the week, with DM and regional currencies almost unchanged. Northern hemisphere markets are likely to continue pushing the US dollar lower this afternoon, as markets remain in a Biden stimulus thrall. Only a surprise higher US CPI print on Wednesday is likely to shake that narrative this week.

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