The US dollar finished May a little worse for wear. NZDUSD, with a 3.2 percent gain and EURUSD’s 3.1 percent rise led the FX majors higher. Only the Australian dollar and British pound underperformed. However, June started with the greenback posting modest gains in overnight trading.
The Nonfarm payrolls pump is being primed. This morning’s upside surprise to the ADP employment change report (253,000 vs. forecast 185,000) will lead to speculation for a better than expected NFP report on Friday. (forecast 185,000 jobs) At the same time, ADP is an unreliable NFP indicator, so maybe not.
Despite the misgivings with the ADP data, the US dollar did eke out some tiny gains, after the release.
Overnight, FX markets were busy.
AUDUSD, the worst performing G10 currency in May, started the same way in June. Retail Sales beat forecasts, posting a 1.0% gain (forecast 0.3%) and AUDUSD surged to 0.7452 from 0.7422. Alas, weak Caixin China PMI data, (Actual 49.6) vs. forecast 50.1) erased that move and AUDUSD dropped to 0.7386 which it is sitting a 6:00 am PDT.
NZDUSD was already drifting lower when the China PMI data was released. However, it recovered from its initial plunge, traded sideways in Europe, and slipped in early New York trading.
USDJPY ticked higher overnight supported by US rate hike expectations and caution ahead of Friday’s US employment data. It added to its gains after this morning’s ADP data.
GBPUSD drifted lower in Asian and Europe and bounced in New York trading. GBPUSD rallied briefly when May PMI data was two ticks higher than expected (Actual 56.7 vs. forecast 56.5) but that move didn’t less. Concern around next week’s UK election weighed on the currency but that sentiment didn’t carry forward into New York and GBPUSD bounced to 1.2870 from 1.2831.
EURUSD has been in a gentle slide lower since Europe opened and it continued after the ADP data. However, the range has been very narrow and the moves, merely noise.
The Canadian dollar was an outlier. USDCAD declined despite broad US dollar strength thanks to the rebound in oil prices. Nevertheless, the decline was shallow.
Oil prices rallied in Asia after the API Weekly Crude data reported that US inventories declined 8.67 million barrels. The jump in WTI prices from $47.74 to $49.04 in Europe offset broad US dollar strength and USDCAD edged lower. Oil prices have since retreated but are well above the post ADP low.
USDCAD Technical outlook:
The USDCAD technicals flipped to bullish with yesterday’s move above the two-week downtrend line when 1.3480 was breached. That moves opens the door to a retest of 1.3570 resistance. The intraday technicals are bullish while prices are above 1.3450. USDCAD is currently sitting in the middle of its one-week, 1.3450-1.3550 trading band., with lots of room to move in either direction and leave the range intact. For today, USDCAD support is at 1.3450 and 1.3410. Resistance is at 1.3520 and 1.3550
Today’s Range 1.3460-1.3550
Chart: USDCAD 1 hour
Source: Saxo Bank
USDMXN Comment and Technicals
The USDMXN rally that started last Monday is still intact despite yesterday’s decline from 18.7645 to 18.5950 today. That decline occurred after the Bank of Mexico (Banxico) raised its 2017 growth expectations. Banxico now expects GDP to expand 1.5% to 2.5%, up from 1.3% to 2.3%. They did acknowledge risk to the forecast stemming from US protectionist trade policies.
The intraday techincals are bullish while prices are above 18.5700, looking for a retest of 18.8000.
Chart: USDMXN hourly