EUR/USD: Dollar wavers on slower pace of Treasury Refunding Sales and mixed labor data

• 10-Year Treasury Yield plunges 14.6 bps to 4.782% after Treasury slows pace of increase in quarterly sales of long-term debt
• ISM Manufacturing plunges from 49.0 to 46.7; New Orders plunged to a five-month low
• JOLTS Report: Job openings rise more than expected, suggesting labor demand is still strong

Wall Street was surprised that the Treasury did not need to boost the pace of long end issuance.  The Treasury might be worried with how high rates have skyrocketed with the long end of the curve. The market is liking the commitment to short paper and that the Treasury only has one more additional step up in quarterly issuance of longer-term debt.

The dollar initially pared gains as bond yields tumbled following the slightly less than expected increase in refunding. Fixed income traders were expecting around $114 billion in upcoming quarterly refunding auctions. Risk appetite got an initial boost given the $112 billion total in auctions and the slower pace of increased sales with long-term debt.

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Mixed 10AM data

This round of data showed some weakness is emerging in the economy, but some of that could be attributed to the UAW strikes, which are now over.  The ISM Manufacturing report fell deeper into contraction territory and new orders supported a slowdown is here.  The September JOLTS job openings data came in a higher than expected but should soften going forward given what we are hearing from the ISM and corporate earnings.  Earlier, the ADP report showed hiring in October softened.  Private payrolls rose 113,000, which was much less than the 150,000 consensus estimate.  Pay growth also dropped to a two-year low.

King dollar is trying to reign supreme, but another push higher might require the Fed to deliver a hawkish hold. Given the weakness that is emerging in the economy, the Fed will show patience in deciding if another rate hike is needed to get  Until the labor market breaks, the Fed will be maintaining a tightening bias.  US exceptionalism is not going away and that could still support the bearish bets on EUR/USD even as this trade remains overcrowded.

EUR/USD daily chart:  

The EUR/USD daily chart above shows price action has started to consolidate between the 1.0450 and 1.07 level.  Short-term resistance has shown the 50-day SMA has been defended by dollar bulls.  If the Fed is unconvincing that they will  maintain a tightening bias, a short squeeze could easily support a move above towards the 1.08 region.

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