ADP employment surges higher
Is Biden Making America Great, geriatric style?
Oil prices rise on US crude inventory decline
USDCAD open 1.2057-61, Overnight range 1.2032-1.2067, Previous close 1.2035
FX at a Glance-24 hours
FX Recap and outlook
Traders awoke from a sleepy overnight session after ADP and weekly jobless claims reports surprised to the upside.
ADP payrolls rose 975,000 in May, easily beating the 650,000 forecast and raising hopes that Friday’s nonfarm payrolls report will have a similar result. Weekly jobless Claims fell to 385,000, from 405,000 a week ago.
The US dollar inched higher on the news but since ADP has a poor track record for predicting NFP results, the gains were limited.
Overnight, FX markets were to-ing and fro-ing without conviction. Traders are awaiting Friday’s nonfarm payrolls data. If the US adds 1 million or more jobs, some analysts believe it would force the FOMC to change the “interest rates low for longer” narrative.
Yesterday, Philadelphia Fed President Patrick Harker(non-voter) said, “We’re planning to keep the federal funds rate low for long, but it may be time to at least think about thinking about tapering our $120 billion in monthly Treasury bond and mortgage-backed securities purchases.”
Hmmm, thinking about thinking is hardly a call to action.
WTI oil prices jumped to $69.37/barrel from $68.65yesterday and are up 4% since Monday. Opec forecasts predicting higher crude demand from China, Europe, and the US, combined with API’s report of a 5.3 million barrel decline in crude inventories as of May 28, underpinned prices.
US President Joe Biden is far less bombastic than his predecessor, but he sure loves Trump’s China and tariff policies. Biden is reportedly adding more Chinese names to the US blacklist to include those that operate in defence and surveillance industries. Biden also slapped 25% tariffs (then suspended them) on goods from the UK, Austria, Italy, Spain, India, and Turkey for those countries having the audacity to levy taxes on US tech companies.
EURUSD traded quietly in Asia then dropped from 1.2213 to 1.2180, even though Eurozone Markit Services and Composite PMI data were better than expected. Bullish EURUSD sentiment from the improving outlook for the Euro area economy, improved coronavirus vaccine distribution, and supportive economic data, is offset by the dovish ECB outlook and fears of the Fed tapering earlier than expected. EURUSD will continue to bounce in a 1.2150-1.2250 range until Friday’s NFP data.
GBPUSD traded quietly in Asia and dipped to the session low of 1.4145 in early European trading. Prices bounced to 1.4202 following better than expected Services PMI (62.9 vs 61.8 in April). GBPUSD intraday technicals are bullish above 1.4140.
USDJPY traded in a 109.56-109.84, supported modestly by rumours of a snap election in the fall, after the Olympics. Prices were also lifted by US 10-year Treasury yields inching higher to 1.60 from 1.582%.
AUDUSD outperformed against NZDUSD. Australian trade was better than expected, Services and Composite PMI reports were mixed, and Retail Sales was unchanged. Both currencies continue to track broad UIS dollar sentiment.
USDCAD rejected a topside move yesterday and consolidated in a 1.2032-1.3267 range overnight Rising oil prices continue to cap gains, while solid support in the 1.2000-1.2010 area limits losses.
Traders are awaiting the US and Canadian employment reports tomorrow. Canada is expected to have lost 20,000 jobs due to the third-wave coronavirus outbreak.
FX trading may get a little noisy when US weekly jobless claims, ADP employment data is released at 8:30 am. The US ISM Services PMI report is due at 10:00 am ET.
USDCAD technical outlook
The USDCAD technical outlook is unchanged from yesterday. USDCAD is in a downtrend below 1.2090, looking for a move below 1.2000 to extend losses to the 1.1935-50 zone. A break above 1.2090 risks a test of 1.2150, but only a decisive breach of 1.2400 negates the downtrend from April 2020. For today, USDCAD support is at 1.2030 and 1.2000. Resistance is at 1.2090 and 1.2150. Today’s range 1.2000-1.2090.
Chart USDCAD daily
Source: Saxo Bank
FX open, high, low, previous close
Source: Saxo Bank