Photo:  Pixabay

September 4, 2020

USDCAD Open (6:00 am) 1.3089-93,  Overnight Range 1.3089-1.3139

  • Canada jobs miss forecast, US Jobs data meet expectations, for Traders don’t care
  •  Asia equities sink, European bourses and Wall Street futures ae mixed
  • USD dollar poised to end week on strong note, AUD biggest loser

Source: Saxo Bank/IFXA Ltd

FX Recap and outlook:  Financial markets make a big deal about the monthly US employment report.  They consider a harbinger of things to come.  It is a big deal for Fed Chair Jerome Powell.  He changed the way the Fed calculates inflation to give him room to focus on employment.   Today’s US nonfarm payroll reports suggests Mr Powell has a lot of focusing ahead of him. 

The US added 1.371 million jobs in August, which was close to the forecast, but less than the gains in July.  They still need a 11.8 million jobs  to bring employment to pre-pandemic levels 

The Canadian employment reports was just as much a snoozefest as the US data. Canada added 245,800 jobs, which is 1.1 million jobs less than there were before the coronavirus.

The US dollar inched higher after the news.

Wall Street tanked yesterday.  The Dow Jones Industrial Average plunged 808 points, the S&P 500 lost 3.51%, and the Nasdaq plunged 4.96%. It should have set the stage for a messy, overnight session.  It didn’t.

Asia equity indexes closed with losses but not even close to what Wall Street dropped.  European equities opened lower but are trading in positive territory.  Wall Street futures are higher after the NFP report.  However, the gains will not be sustained if more profit-takers emerge ahead of the long weekends in Canada and the US.

EURUSD’s plunge to 1.1790 yesterday from 1.2010 looked like a serious move.  The reality is different.  If prices remain above the 1.1700-60 level, the uptrend from May is intact. EURUSD price action may get noisy between NFP release, and the 10:00 am ET option expiry time due to chunky options strikes in the 1.1780-00  and 1.1870-1.1900 area.  Traders are still mulling over the risk of very dovish ECB policy statement next week.

GBPUSD bounced erratically in a 1.3257-1.3318 range, overnight then extended losses to 1.3210 in NY after the NFP data. New Brexit concerns and comments from  Bank of England policymaker Michael Saunders undermined the currency pair.  Mr Saunders warned that the BoE’s Brexit forecast might be too optimistic.  Also some  government officials  are warning  there may be on a 30-40% chance for a EU/UK trade deal. 

USDJPY drifted in a narrow 106.07-106.24 range, ahead of today’s US data. Safe-haven demand for yen following the carnage on Wall Street was offset by a rebound in US treasury yields.

AUDUSD and NZDUSD are trading near the top of their overnight ranges, supported by hopes that the NFP data will confirm a robust US economic recovery.

USDCAD rallied on the back of broad US dollar strength yesterday until it ran into a wall at 1.3150 which is the downtrend line from July. The weaker than expected Canada jobs data and the as expected US results have underpinned the currency.

USDCAD Technicals:  The intraday technicals are bearish below 1.3150 looking for a drop below 1.3050 to revisit 1.2990 support.  A break of 1.3150 would extend gains to 1.3270.  for today, USDCAD support is at 1.3050 and 1.3010.  Resistance is at 1.3150 and 1.3210.  today’s Range 1.3050-1.3150.

Chart: USDCAD  4 hour

Source:  Saxo Bank

FX open (6:00 am EDT) High, Low, and previous close

Source:  Saxo Bank