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The Dollar Tumbles Following Soft Payrolls Report

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The dollar slid after the combination of a disappointing Non-farm payroll report, and downward back revisions. The slightly firmer weekly hourly earnings data was a slight offset, though not nearly enough to keep the USDJPY from falling to 118.94 from 119.90, matching the March 27 base. Following the initial moves, the dollar has stayed down, as yields remain lower, and equity futures move lower.

U.S. nonfarm payrolls increased only 126k in March from a downwardly revised 264k in February and 201k in January which was 239k for a net -69k revision. This compared to expectations of an increase in payrolls of more than 200K. The March headline is the smallest gain since December 2013 and compares to the 197k 3-month average.

The unemployment rate was steady at 5.5%. Average hourly earnings rose 0.3% after the 0.1% gain in February and a 0.6% jump in January. As for more of the labor market details, household employment edged up 34k with the labor force falling 96k. Total private payrolls rose 129k with declines of 13k in the goods producing sector, and 1k in both construction and manufacturing. Service sector employment rose 142k. Government jobs slipped 3k.

Treasury yields gapped lower on payrolls headlines, which came in below even the most pessimistic whisper numbers given the headwinds in the oil sector, strong dollar and port strikes, which all took a toll in the end. Though the bad data proved a little shocking in the illiquid “Good Friday” conditions. The T-note yield dove from the 1.90% area to 1.83% matching Thursday lows, while the 2-year yield gapped lower to 0.488%. With that miss and downward revisions a June Fed lift-off of interest rates in the US seems pretty remote.

The USDJPY is poised to test upward sloping trend line resistance near 118.50. Short term resistance is seen near the 10-day moving average at 199.55. Momentum is negative with the MACD (moving average convergence divergence) index printing in negative territory with a downward sloping trajectory.

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