June 5, 2020
USDCAD Open (6:00 am) 1.3514-18, Overnight Range: 1.3491-1.3528
- US gains 2.5 million jobs in May, while Canada adds 289,600
- ECB actions spark new round of “risk-on” sentiment
- OPEC to announce production cut extensions by Saturday
- US dollar rallies after NFP
Percent change in currency value since previous close
Source: Saxo Bank/IFXA
FX Recap and outlook: To paraphrase Mark Twain “The reports of the US dollar’s death are greatly exaggerated.” The US economy roared back in May, gaining a spectacular 2.25 million jobs which drove the unemployment rate down to 13.3% from 14.7%. The results exceed most pundit’s expectations and impressed President Trump who tweeted “Congratulations to wonderful Charles Payne on having been so optimistic, and therefore correct. Market up BIG!!!”
The US dollar came alive. It spent the week being battered and bruised, but rose from the canvas following the data. EURUSD had dropped from 1.1386 to 1.1336 before the release and then dropped again, touching 1.1292.
Gold bulls took it on the snout. XAUUSD plummeted to 1,682.52 from an overnight peak of $1,716.02. Oil prices eased slightly but remained elevated on expectations that Opec and Opec plus other producers, will announce an extension to existing production cuts, as early as Saturday.
The stellar Canadian Labour Force Survey results were lost in the shadow of NFP. Statistics Canada said “In May, employment rose by 290,000 (+1.8%), while the number of people who worked less than half their usual hours dropped by 292,000 (-8.6%). Combined, these changes in the labour market represented a recovery of 10.6% of the COVID-19-related employment losses and absences recorded in the previous two months. Three-quarters of the employment gains from April to May were in full-time work (+219,000 or +1.6%). Compared with February, full-time employment was down 11.1% in May, while part-time work was down 27.6%.”
Employment declines halt in May
USDCAD dropped to 1.3394, on a knee jerk reaction, put rallied on the back of broad US dollar weakness.
EURUSD topped out at 1.1383 overnight on the back of renewed “risk-on” sentiment, triggered by yesterday’s ECB actions. The ECB raised the Pandemic Emergency Purchase Program (PEPP), by 0128600 billion to total €1.35 trillion. Germany’s announcement of a new €130 billion stimulus plan yesterday, can the earlier France/Germany proposal of an EU €750 billion COVID-19 Relief Fund turned the EURUSD outlook positive. Traders are now looking for levels to buy rather than levels to sell.
USDCAD Technicals: The intraday technicals are bearish below 1.3510, looking for a break of support in the 1.3390-1.3400 area to extend losses to 1.3350. Longer term, the drop to 1.3395, “filled the gap” from the Asia open March 9. A close above the 200 day moving average at 1.3460 today, would suggest the move below the 200 day moving average was merely a one-off spike and not indication of more weakness ahead. For today, USDCAD support is at 1.3390 and 1.33500. Resistance is at 1.3460 and 1.3505. Today’s Range 1.3390-1.3470
Chart: USDCAD 30 minute
Source: Saxo Bank