Source: Wikipedia

July 2, 2021

US Nonfarm payrolls surge 850,000

Congressional Budget Office (CBO) forecast 7.0% growth in 2021, IMF predicts 7.4%

US dollar opens with gains

USDCAD open 1.2429-33,  Range July 1-2,  1.2364-1.2448,  Thursday close 1.2438

FX at a Glance Wednesday close/ Friday open

FX Recap and outlook

US nonfarm payrolls surprised to the upside, rising 850,000 in June compared to forecasts for a 700,000 increase.  The unemployment rate ticked up to 5.9% from 5.7%.  The headline number is impressive, but the details are soft.   The job gains were in the sectors that suffered the most from the pandemic, but other sectors are not following suit.

The US dollar retreated on the news, but that wasn’t the case for Wall Street futures, which rallied.  10-year Treasury yields were unchanged at 1.442%.

The US Trade deficit widened from $88.1 billion to $89.2 billion.

The Congressional Budget Office (CBO) and the IMF  raised the 2021 US GDP forecasts to 7.4% and 7.0% respectively.   Both believe in a robust US pandemic recovery fueled by fiscal stimulus.

The Japan Government Pension Investment Fund is the worlds largest pension fund and it announced it gained 25% (USD 339 billion) in the year ending March 2021.

EURUSD bounced to the top of its1.1809-1.1856 range following the US data.  ECB President Christine Lagarde repeated her concerns that the Eurozone recovery “remains fragile.”  The break below support at 1.1850 opens the door to steeper losses to 1.1705. ECB President Christine Lagarde continued to thump on the dovish drum as she repeated concerns that the recovery “remains fragile.”  The break below 1.1840 is bearish and leaves EURUSD vulnerable to further losses towards 1.1710.

GBPUSD chopped lower since closing at 1.3833 on Wednesday, falling to 1.3739 in early NY trading today, then bouncing to 1.3785 following the US employment report.  GBPUSD is tracking broad US dollar sentiment while the downtrend from June 11 remains intact below 1.3840.

USDJPY climbed from 111.00 to 111.62 yesterday and consolidated in a 111.35-111.65 range overnight.  Traders have ignored the slide in US treasury yields as USDJPY is boosted by broad US dollar demand.

AUDUSD slid from 0.7505 yesterday to 0.7451, where it opened today, with prices suffering from US dollar demand.  Prices are suffering from the resurgence of lockdown measures due to the coronavirus delta variant.

Opec is reportedly planning to increase crude production by 500,000 barrels per month from August to December.  WTI climbed from $73.30/b to $76.10 yesterday, before sliding back to $75.14/b in NY today.  The UAE, Iraq, and Kazakhstan, want their baseline quotas increased, and the discussion continues.

USDCAD rallied from 1.2364 yesterday to 1.2448 overnight but dropped back to 1.2377 in NY today, after the US employment data.  The surge in crude prices should limit USDCAD gains.  Nevertheless,   direction is at the mercy of broad US dollar sentiment.

The bond market will close at 2 pm, and US Markets are closed on Monday.

USDCAD technical outlook

The USDCAD technicals are bullish above 1.2230 (June uptrend line) and bearish below 1.2450 December downtrend line), A topside break targets the 1.2500 area, while a move below 1.2230 shifts the focus to 1.2000.  For today, USDCAD support is at 1.2370 and 1.2320. Resistance is at 1.2450 and 1.2500   Today’s range 1.2340-1.2420

Chart USDCAD daily

Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank