July 5, 2024

• Upside surprise to NFP, Canada’s job data disappoints.
• UK has a new Prime Minister (Canadians can only wish)
• US dollar opens with losses across the board, consolidates move post-NFP.

FX at a Glance

Source: IFXA/RP

USDCAD open 1.3609, overnight range 1.3602-1.3632,  previous close 1.3613

USDCAD lost ground yesterday and then consolidated the losses overnight. UK election news, Biden’s mental health, and the countdown to the US and Canadian employment data limited FX movement. USDCAD rallied from 1.3608 to 1.3632 post-LFS data but has since retreated.

Canada’s Labour Force Survey (LFS) showed employment fell by 1,400 jobs, sharply lower than the 22,500 expected while average hourly earnings rose 5.4% compared to 5.1% in May.

USDCAD rallied from 1.3608 to 1.3632 post-LFS data but has since retreated.

Canada’s employment data should be taken with a grain of salt if Desjardin Bank economists are to be believed. They suggest that the Federal governments massive hiring spree since 2019, which added 637,000 employees to the public sector, are distorting wage growth data.

USDCAD Technicals

The intraday technicals are  bearish while trading below 1.3630 and setting the stage for a test of the support cluster in the 1.3590-1.3620 zone.  A break above 1.3630 shifts the focus back to 1.3680.

The daily chart highlights a cluster of support in the 1.3590-1.3620 area. The 100-day moving average is at 1.3630 and the 200 day moving average is at 1.3590. The 38.3% Fibonacci retracement of the 2024 range is at 1.3592 while the uptrend line from the beginning of January sits at 1.3600. A decisive move through this cluster zone targets 1.3515, the 50% Fibonacci retracement area.

For today  USDCAD support is at 1.3590 and 1.3550. Resistance is at 1.3630 and 1.3680. Today’s range is 1.3560-1.3660

Chart: USDCAD daily

Source: DailyFX

Not Hiring as Many, but Still Hiring.

Today’s nonfarm payrolls data surprised to the upside with the US gaining 207,000 jobs in June, above the 190,000 expected, but below the 272,000 in May. Average hourly earnings were unchanged, rising 0.3% m/m while the unemployment rate inched up to 4.1% compared to the previous result of 4.0%. The results support Fed Chair Powell’s view that there is no need to rush to cut interest rates. However, the bond traders still anticipate that the Fed will be cutting rates in September.  The US 10-year Treasury yield is hovering around the 4.30% area.

In the US, may workers used the July 4^th holiday to take an extended long weekend which suggests FX markets will be thin.

Early to Bed, But will He Rise?

US President Biden refuses to step aside, claiming that a bad debate does not erase his accomplishments for 3 ½ years. He said all he needs is to go to bed by 8:00 pm. To mark Independence Day, Mr. Biden paid tribute to veterans of that war of independence, some of whom he knew personally. Even so, a CNN poll suggests 75% of American voters believe the Democrat party has a better chance at holding the presidency without Biden

EURUSD

EURUSD traded in a 1.0809-1.0831 range overnight then climbed to 1.0842 after the US employment data did not offer anything to diminish September rate cut hopes. EURUSD is underpinned by election polls in France that suggest the National Party, led by Marine Le Pen will not get an absolute majority. ’s National Party will fall far short of an absolute majority.

GBPUSD

GBPUSD surged to 1.2811 from 1.2754 on the heels of the nonfarm payrolls report. The  UK election saw the Labour Party win a resounding victory  which had zero impact on FX as it was fully priced in. The end of the election leaves the door wide open to a Bank of England rate cut on August 1 and with the odds rising to 71.8% for a similar Fed move on July 31 leaves Gilts and Treasury spreads unchanged.

USDJPY

USDJPY  remained inside its overnight range of 160.53-161.40  following the US data although prices garnered a bit of support after the US 10-year Treasury yield eased to 4.31% from 4.345% yesterday.

AUDUSD and NZDUSD

AUDUSD rallied, post-NFP and broke through the top of its overnight 0.6112-0.6125 band to reach 0.6753. The RBA is expected to leave rates unchanged at Wednesday’s meeting.

NZDUSD tracked Aussie and rose from 0.6107 to 0.6141.

USDMXN

USDMXN sank for the third day in a row, falling to 18.0551 from 18.1119 mainly because the greenback remained on the defensive ahead of today’s nonfarm payrolls data. Earlier comments from a Banxico official suggesting the need to keep interest rates elevated are also weighing on prices. The intraday technicals are bearish below 18.4400, but the uptrend from May 21 is intact above 17.5200.

Bitcoin (BTCUSD)

BTCUSD plunged to 53,219 from 58,843 a drop of 9.5% overnight, and 28% since it peaked at 73,803 in March. BTCUSD holders are front-running expected creditors’ sales when they receive the proceeds from Mt. Gox bankruptcy distributions.

FX high, low, open (as of 6:00 am ET)

Source: Investing.com

China Snapshot

PBoC fix: 7.1289 vs exp. 7.2704 (prev. 7.1305).

Sanghai Shenzhen CSI 300 fell 0.43% to 3431.06

Chart: USDCNY and USDCNH

Source: Investing.com