Photo: Bing AI

October 6, 2023

  • Ka-boom! NFP +336k, Canada jobs +63k
  • Canada, US, and Japan closed on Monday.
  • USD opens weaker compared to Thursday, little changed overnight.

FX at a Glance

Source: IFXA/RP

USDCAD Snapshot:  open: 1.3710-14, overnight range: 1.3695-1.3728, close 1.3704

Holy Moly!! Canada gained 63,800 jobs in September, triple the consensus forecast and certainly tipping the scales for a 25 bp BoC rate hike on October 25. At first glance it is a blow-out result, but the devil is in the details.  And these details show that the headline number masks the weakness.  All the jobs were government and those who are self-employed.  The private sector is not hiring.

As the dust settled, USDCAD is largely unchanged from its pre-data level.

This weeks plunge in oil prices is a bonus to consumers and it also eases inflationary concerns. The over 9.0% drop this week was due to a host of factors including recession fears dampening the outlook for rising demand and from selling by options and technical traders.  Of course, everything could change next week as the price action in the days preceding NFP are often just noise and exaggerated due to reduced liquidity.

Canada and the US are closed Monday.

USDCAD Technicals

The intraday USDCAD technicals are muddled after USDCAD dropped through support at 1.3730 on an hourly chart and snapped the uptrend from September 29. That suggests an intraday bearish bias while below 1.3740.

Longer term, the uptrend line from the beginning of August is intact while prices are above 1.3430 which is guarded by support at 1.3590.

For today, USDCAD support is at 1.3680 and 1.3630.  Resistance is at 1.3740 and 1.3790. Todays Range 1.3770-1.3870.

Chart: USDCAD daily


G-10 FX recap

It’s all about the jobs. And in September, the US created a bunch of them: 336,000 to be exact, nearly double the consensus forecast for a 175,000 gain. Even better, the August numbers were revised 40,000 higher. However, average hourly earnings fell to 4.2% y/y from 4.3% and remained unchanged at 0.2% m/m.

The data was described as a “goldilocks report,” as the strong employment combined with falling wages raises hopes for a soft landing.

Bond traders are betting on higher rates. The US 10-year Treasury yield jumped from 4.75% before NFP to 4.84% afterward.

Yesterday, San Francisco Fed President (and FOMC voter), who appeared to favor leaving interest rates unchanged, may have to change her mind.

Wall Street traders were spooked; European S&P500 future gains were erased and are down 0.75% in the wake of the employment data and higher Treasury yields.

EURUSD traded sideways in a 1.0531-1.0562 range, garnering a bit of support from the softer US dollar environment. Prices dropped to 1.0484 after the NFP numbers, with negative sentiment being exacerbated by dovish comments from an ECB official. Governing Council member Francois Villeroy said, “Today, I think there’s no justification for an additional increase in the ECB rates,” citing a sharp rise in borrowing costs and “good” figures on inflation to justify his view.

GBPUSD plunged from its overnight session peak of 1.2219 to 1.2106 after the US employment report almost guaranteed that the Fed will raise rates to 5.75% on November 1. The Halifax House Price Index fell 0.4% m/m in August, which was better than the forecast for a 0.8% drop.

USDJPY dipped, then doodled higher in a 148.37-149.07 pre-NFP, and touched 149.54 after the surge in US Treasury yields. Former BoJ Chief Economist Kazuo Momma predicted that policymakers would discuss tweaking forward guidance and the YCC policy at the October meeting, which may act as a yellow light for USDJPY bulls.

AUDUSD traded in a 0.6354-0.6382 range, then dropped to 0.6312 in reaction to the US jobs data and rising Treasury yields. The RBA Financial Stability Review warned that global financial risks are elevated, pointing to China’s property woes and tightening financial conditions.

FX high, low, open


China Snapshot

Chinese markets are closed for Golden Week holidays.

Bank of China Fix: closed.  previous 7.1798.

Shanghai Shenzhen CSI 300 closed for Golden Week.

Chart: USDCNH (offshore)