US economy basking in glow of Friday’s blowout NFP report
US dollar opens mixed in very quiet trading
USDCAD open (6:00 am ET) 1.2560-64, Overnight Range 1.2560-1.2593, Friday Close 1.2577
FX at a Glance
Source: IFXA Ltd/RP
It is Easter Monday. Many major FX markets are closed, including Australia, New Zealand, most of Europe and the UK. China and Hong Kong markets were also closed for national holidays. Those that were open were not very active.
The US recovered 916,000 jobs in March and another 156,000 in upward revisions to February and January data. Analysts are already predicting a similar result for the April data. If the pace of job growth continues, the US will recover all the 8.5 million jobs that have been lost since the pandemic and force the Fed to rethink its “no rate hike until 2024” forecast.
Wall Street closed higher on Friday, led by a 1.76% gain in the Nasdaq. The Nikkei finished with a 0.79% gain, and S&P futures are pointing to a positive open on Wall Street.
Oil prices are lower following the Opec decision to phase out production cuts. Crude production will increase by 350,000 barrels on May 7 and June and buy 440,000 in July. Saudi Arabia’s voluntary $1.0 million barrel/day cut is also being phased out. WTI oil has slipped from $61.69/b on April 1 to $60.28/b today.
US Treasury yields jumped from 1.673% pre-NFP to 1.722% post NFP and are steady at 1.725%. Prices continue to be supported by expectations for higher rates due to rising inflation from US stimulus plans.
EURUSD traded in a 1.1742-1.1771 since Friday. The US employment data raised hopes for a robust, US fueled global economic rebound. However, EURUSD gains were limited by widening US and EU interest rate spreads and ongoing coronavirus issues in Europe.
GBPUSD bounced in a 1.3814-1.3867 range in a thin market. The intraday technicals are bullish above 1.3810 with a move above 1.3900 targeting 1.4005. Traders continue to expect UK economic outperformance compared to the EU due to the successful UK vaccination program.
USDJPY continues to be underpinned by steady to firm US Treasury yields. Traders are waiting for FX markets to normalize after the recent month and quarter-end price action and the new Japanese fiscal year. The short term technicals are bullish above 110.00.
AUDUSD continues to trade defensively after dropping from 0.7840 in the middle of March. Prices continue to be undermined by the drop in commodity prices, including iron ore, and China’s hostile trade actions against some Australian imports. The RBA monetary policy meeting is tomorrow. Prices traded in a 0.7618-0.7640 since Thursday’s close.
USDCAD is chopping about in a 1.2540-1.2630 range. The long term technicals turned bullish with the break above 1.2610 last week. However, month and quarter-end flows into a long weekend question the move’s validity as did the quick retracement back to 1.2550. Recent Canadian data has been better than expected, and Canada is expected to benefit from US stimulus spending.
Traders expect today’s US data to reaffirm the economic recovery outlook. ISM Services PMI, and factory orders are on tap.
USDCAD Technicals: The intraday technicals are mixed inside a 1.2540-1.2630 range. A break above 1.2630 is needed to shift the focus to 1.2800 while a breach of 1.2540 puts 1.2460 in play. For today, support is at 1.2530 and 1.2510. Resistance is at 1.2610 and 1.2650. Todays Range 1.2530-1.2610
Chart: USDCAD 4 hour
Source: Saxo Bank
FX open (6:00 am EDT) High, Low, and previous close
Source: Saxo Bank