May 3, 2024
- Rate cut hopes buoyed by Powell comments.
- Nonfarm payrolls rise 175,000 (forecast 243,000)
- USD dollar drifts drops on Fed rate cut outlook.
FX at a Glance
Source: IFXA/RP
USDCAD Snapshot: open 1.3665, overnight range 1.3655-1.3678, close 1.3674
USDCAD blew through the overnight low and dropped to 1.3610 after US nonfarm payrolls rose just 175,000 , 68,000 less than expected. The data extends the US dollar weakness from yesterday after global traders revisited the Fed rate cut story. They no longer fear a Fed rate hike and that has taken the wind form the US dollar sails. That is good news for USDCAD bears as it offsets BoC Governor Macklem’s comments that policymakers were getting close to cutting rates. The reduced risk of Fed rate hikes combined with Macklem’s remarks increased the odds for a BoC rate cut in June or July.
WTI oil prices remain depressed and traded in a 78.81-79.39 range overnight, but bounced to the top of the range post-NFP. The easing of Middle East tensions, rising US crude inventories, and the risk of a global economic slowdown are weighing on prices.
There are no Canadian economic reports today.
USDCAD Technicals
The intraday USDCAD technicals pivoted to bearish yesterday with move below 1.3720 and are now looking to test support in the 1.3640 area. A break above 1.3720 shifts the focus to 1.3800.
The uptrend line from the beginning of January is intact above 1.3540, which is also where the 200 day moving average resides. That level is being guarded by support in the 1.3610-1.3620 area, which had capped gains all the way back to the first week of December.
For today, USDCAD support is at 1.3610 and 1.3580. Resistance is at 1.3660 and 1.3690. Today range is 1.3590-1.3660.
Chart: USDCAD 1 day
Source: DailyFX
Job Gains Slowing
The April US employment report was weaker than expected which reinforced hopes that the Fed will cut rates by November. NFP rose by just 175,000 jobs in April compared to the forecast of 243,000 and the 303,000 gain in March. The unemployment rate rose to 3.9% from 3.8%. Bond traders reacted viciously and drove the 10-year yield down to 4.453% from a pre-report level of 4.58%. S&P 500 futures had risen 0.40% pre-data and spiked to 1.12% immediately afterwards.
The Light Bulb Goes On
It took a while, but yesterday, traders reacted to Fed Chair Jerome Powell saying, “I think it’s unlikely that the next policy rate move will be a hike,” during Wednesday’s press conference. Prior to the Fed meeting, markets had worked themselves into a lather about the possibility of a rate hike. The Fed said rate moves would be data dependent, and a slew of top-tier economic reports pointed to the need for higher rates. Traders bought bonds, which gave a green light to US dollar bears who drove the US dollar index (DXY) down from 105.68 to 104.41 following the NFP report today.
EURUSD
EURUSD spiked to 1.0812 in the wake of the softer NFP report after trading in a 1.0724-1.0748 range overnight. The employment data combined with yesterday’s remarks by Chief Economist Philip Lane suggest that ECB and FED interest rate differentials will narrow. Mr Lane warned that “A robust approach to making rate decisions under conditions of high uncertainty is to avoid pre-commitments or creating unwarranted expectations about the future rate path.”
GBPUSD
GBPUSD popped its overnight top and jumped to 1.2635 after trading in a 1.2521-1.2567 band overnight. Prices were also supported by UK Services and Composite PMI data, which according to S&P global “The survey results are consistent with the UK economy growing at a quarterly rate of 0.4% and therefore pulling further out of last year’s shallow recession.”
USDJPY
USDJPY plunged to 151.87 after trading defensively in a 153.80 -152.75 range overnight. Concerns about BoJ intervention, the risk oof higher Japanese rates and the prospect of a November Fed rate cut drove USDJPY lower.
AUDUSD and NZDUSD
AUDUSD drifted in a 0.6582-0.6586 range then blasted to 0.6647, post-NFP due to improved global risk sentiment. Earlier, Australian PMI data gave the currency a bit of a lift because, according to to S&P Global, “The Australian Composite PMI for April confirms earlier ‘Flash’ PMI findings of an ongoing rebound in activity levels, continued employment growth, and improved business confidence. The services sector is driving the improvement in economic activity levels. Both the business activity and new order indexes have consistently remained in expansion territory over the past three months.”
NZDUSD soared to 0.6045 from an overnight peak of 0.5982 due to broad US dollar weakness.
USDMXN
USDMXN peaked at 17.0030 overnight, then dropped to 16.8287 after the US employment data on rekindled hopes for US rate cuts.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot`
PBoC fix: 7.1063 (prev. 7.1066)
Chinese markets closed.
Shanghai Shenzhen CSI 300 fell 0.54% to 3604.39.
Chart: USDCNY and USDCNH 4 hour-as of April 30
Source: Investing.com
