US nonfarm payrolls was expected to show a larger than forecast gain in new jobs due to the strong ADP employment report yesterday and consistently strong initial jobless claims reports.  It didn’t.

Instead of the forecast 185,000 increase, NFP showed a gain of only 138,000 jobs. Average hourly earnings were unchanged at 0.2% and the Labour Force participation rate dropped to 62.7% from 62.9% previously.  The only silver lining was a dip in the unemployment rate to 4.3% from 4.4%.

The US dollar got spanked on the news. EURUSD spiked to 1.1270 from 1.1205.  USDJPY dropped from 111.53 to 110.77.  Even Sterling posted a gain, rising to 1.2892 from 1.2850.

Aussie and Kiwi rallied as well.

In Canada, the Merchandise Trade data was mostly as expected.  USDCAD dropped from 1.3525 to 1.3493 on the broad US dollar weakness.  However, soft oil prices limited the decline.

It was an interesting, yet fairly quiet overnight session.

President Trump bailed out of the Paris Accord and traders bailed out of oil positions.  West Texas Intermediate (WTI) dropped over 2 percent since yesterday’s close on fears that the lack of environmental controls means it is open season for oil drilling in the US. More US oil means a bigger global oil glut.  WTI dropped from $48.01 to $46.86 and opened in New York just above the low.

In Asia, USDJPY was bid, rising from a low of 111.32 to 111.70 on the prospect that strong US nonfarm payrolls data will raise expectations for more US rate hikes in 2017.

AUDUSD and NZDUSD traded with a negative bias inside very narrow ranges

EURUSD traded sideways inside a 1.1212-1.1227 range while traders awaited the US data. They ignored Eurozone Producer Price data that was higher than in March, but slightly below the April forecast.

Sterling drifted lower, weighed down by UK election polls, until a better than expected construction PMI report (Actual 56 vs forecast 52) gave it a lift.  The jump in construction PMI pushed the FTSE100 to a new record high.

The week will end with the US dollar on the defensive and traders looking ahead to next Thursday’s UK election and ECB meeting.

USDCAD Technical outlook:

The intraday, short term and long term USDCAD technicals are bullish. Intraday, if prices are above 1.3490, the risk is for a break above 1.3560 to extend gains to 1.3610 and then 1.3660.  A move below, 1.3490 would lead to a test of support at 1.3430 which is guarding the long-term uptrend line at 1.3220.  for today, USDCAD support is at 1.3490 and 1.3460.  Resistance is at 1.3540 and 1.3580.

Today’s Range 1.3460-1.3550

Chart: USDCAD daily

Source: Saxo Bank