Source: Metallica

August 6, 2021

US adds 943,000 jobs in July

Canada Labour Force Survey misses forecast

Dovish RBA Governor Lowe undermines AUDUSD

USDCAD open 1.2511-15, Overnight Range 1.2496-1.2540, Previous close 1.2501

FX at a Glance:

Source: IFXA/RP

FX Recap and outlook

The US employment report lived up to its advanced billing.  Canada’s Labour Force Survey did not.  US Nonfarm payroll (NFP) employment increased by 943,000 in July, the unemployment rate fell to 5.4%, better than forecast and 0.5% below the June level, fueled by a rebound in the leisure and hospitality sectors.

Canada added 94,000 new jobs, which isn’t bad, but the result was below the forecast for an increase of 178,000, and well below the June gain of 213,000.  The good news is that all the gains were in the private sector.

The US dollar rallied following the better than expected US data and US 10-year Treasury yield climbed to 1.295% from 1.245%.

 Traders believe that the time is fast approaching when Fed Chair Jerome Powell and his colleagues will acknowledge  that inflation and employment reflect “substantial progress” and announce tapering plans.

EURUSD drifted lower overnight falling from 1.1834 to 1.1809 at the NY open, then added to its losses after NFP.  The risk of the Fed tightening sooner than expected while the ECB continues with its accommodative monetary policy, leaves EURUSD vulnerable to a break below 1.1750 to test 1.1550.

GBPUSD tested support at 1.3890 which held, and maintains its bullish bias. The Bank of England has a modest bias toward tightening, which contracts with the ECB, undermining EURGBP, and supporting GBPUSD.  Traders are looking for a break above 1.4020 to extend gains to 1.4200

USDJPY cracked above 110.00 after the NFP report boosted US dollar demand and lifted US Treasury yields.  However, the USDJPY technicals are negative while prices are below the 11030-50 area.

AUDUSD was already under pressure after dovish comments from RBA Governor Philip Lowe.  Mr Lowe warned about a risk of a double dip recession due to the latest coronavirus outbreak, and the said he would prefer a lower currency.  The NFP data didn’t help.  AUDUSD dropped from 0.7405 to 0.7373 in NY.

USDCAD recouped overnight losses, climbing from 1.2496 in Asia to 1.2540 after the weaker than expected Canadian Labour Force Survey, and the robust US employment report.  The prospect that the BoC may lag a Fed rate increase is underpinning USDCAD while a rebound in oil prices is a drag on gains.

Canada Ivey PMI is due at 10:00 am ET.

USDCAD technical outlook

The USDCAD uptrend from the middle of June  is intact while prices are above 1.2440, looking for a break above 1.2610 to extend gains to 1.2800.  A break below 1.2440 targets 1.2200.   For today, USDCAD support is at 1.2490 and  1.2450. Resistance is at 1.2550 and 1.2610.   Today’s range 1.2480-1.2550

Chart USDCAD  4 hour

Source: Saxo Bank

FX open, high, low, previous close

Source: Saxo Bank