Photo: pixsabay

May 7, 2021

US adds 266,000 jobs, well below forecast of nearly 1 million

Canada  unemployment ratee spikes to 8.1%, 207,000 jobs disappear

US dollar opens mixed then drops sharply, post NFP

USDCAD open 1.2182-86,  Overnight Range 1.2150-1.2188, close 1.2148

FX at a Glance

FX Recap and Outlook

What a difference a day makes. Thursday’s better than expected weekly jobless claims were the lowest seen since March 14, 2020, and seen as evidence the post-pandemic US economic boom was gaining momentum.  Economists and analysts rushed to upwardly revise their forecasts for today’s nonfarm payrolls (NFP) report.  Ooops.

The US economy only added 266,000 jobs compared to 978,000 expected and the unemployment rate ticked higher to 6.1% from 6.0%

The US dollar plunged.  The employment report managed to support projections for robust economic growth but dampened fears the recovery was overheating.  That means Fed Chair Powell is correct, and US rates do not need to rise. That’s what bond traders believe as well.  10-year US Treasury yields dropped to 1.521% from 1.58% following the NFP data.

EURUSD spiked to 1.2136 from 1.2055, with a break above 1.2150 opening the door to a test of resistance the February peak of 1.2240.  European equity markets rallied.  ECB Governing council member Martins Kazaks hinted that the ECB could begin tapering in June.

GBPUSD rallied alongside EURUSD, jumping to 1.3951 from 1.3890.  Prices are getting a bit of support from the Bank of England’s tapering announcement yesterday and my hopes for a robust, US-led global economic rebound. Nevertheless, GBPUSD needs to break resistance in the 1.4000-10 area or risk further 1.3850-1.4000 consolidation.

Traders ignored better than expected Chinese Caixin Services PMI and Trade data, even though there are reports that the US and China will meet to review the progress of the Phase 1 Trade Deal.  Biden Administration officials continue to admonish China over human rights, as well.

USDJPY traded quietly in a 108.95-109.19 range. The bottom dropped outpost-NFP, and USDJPY hit 109.28, in concert with the drop in US Treasury yields.

AUDUSD and NZDUSD were rangebound until the US employment report when both currency pairs rallied.  AUDUSD climbed to 0.7834 from an overnight low of 0.7763, while NZDUSD touched 0.7274.  Both currency pairs have backed off their peaks due to pre-weekend profit-taking.

USDCAD dropped from 1.2287 and closed at 1.2148 ( 82.3 cents US) yesterday. Prices bounced to 1.2192 after Canada lost 207,100 jobs in April.  A job loss was expected due to the significant number of new coronavirus lockdown measures implemented in many regions in April.  However, traders are willing to look past ugly domestic employment data today as they anticipate a robust Canadian economic recovery fueled by rising commodity prices.

Canada Ivey PMI for April is on tap.

USDCAD Technical Outlook

The  intraday USDCAD technicals are bearish following the decisive breach of support at 1.2250 and 1.2210.  Those levels will revert to resistance.  Further weakness below 1.2150 targets 1.2090 and 1.2060. For today, USDCAD support is 1.2140  and 1.2090  Resistance is at 1.2190 and 1.2250.  Today’s Range 1.2130-1.2230

Chart: USDCAD 4 hour

Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank