The USD weakened against a number of its counterparts, ahead of the release of the US employment report for April during the American session today. The release is expected to show the grim picture of the US employment market, with the effect of a full month of lockdown measures imposed on the US economy in order to slow the spreading of COVID 19. Unemployment rate is expected to rise reaching 16% and the NFP figure to reach a record low of -22 million, while the predicted acceleration of the average earnings growth rate is not expected to provide comfort for investors. The market sentiment seems to be fuelled by the gradual reopening of various economies around the world over the past few days, as well as some sort of economic normalization. Also, analysts tend to note that the USD may also have weakened as U.S. short-term bond yields hit record low levels, with markets starting to price in negative U.S. interest rates for the first time. At this point it should be mentioned that the Fed has steadily resisted the idea of negative rates over the past two meetings, yet the price action may suggest that part of the markets may expect a much worse downturn for the US economy. Should the market sentiment continue we could see the USD weakening further and such a sentiment could be further enhanced should there be a negative surprise in the US employment release later today, unless the safe haven qualities of the green back come to the rescue. AUD/USD moved higher and breaking the 0.6490 (S1) resistance line now turned to support. We maintain our bullish bias for the pair and for it to change we would require a clear breaking of the upward trendline incepted since the 7th of the month. It should be noted that the pair seems to be in a make or break position as it is about to test the prementioned upward trendline. Should the bulls maintain control over the pair, we could see it breaking he 0.6615 (R1) resistance line and aim for the 0.6700 (R2) resistance level. Should the bears take over, we could see the pair breaking the prementioned upward trendline, the 0.6490 (S1) support line and aim for the 0.6385 (S2) support level.
AUD, CAD strengthen as market sentiment improves
In general, riskier currencies seem to be preferred by market participants as the Aussie gained against the USD, while at the same time market reactions for the USD against the JPY remained rather muted. On the one hand the Aussie gained further ground especially as Chinese trade balance outperformed market expectations and analysts tended to imply that the Chinese economy could recover earlier than expected from the Coronavirus lockdown measures imposed in the past months. Yet we maintain our reservations as China’s import growth rate remained deep in the negatives. On the other the Loonie also enjoyed substantial support against the USD as the currency found substantial support also from stabilising oil prices. However, at this point it should be mentioned that the stabilisation of oil prices at the current stage, is still at low levels. A correction even higher could be in the cards for the commodity’s prices, yet the situation may be hanging in the balance on how successful the reopening of the economies will be. We could see CAD traders though have also their attention turned to the release of the Canada’s employment data for April later today. Should the market sentiment persist in favouring commodity currencies we could see the AUD and CAD strengthen further, yet the situation seems still fragile. USD/CAD moved lower yesterday breaking the 1.3970 (R1) support line now turned to resistance. We expect the pair to continue to drop as it seems to be under the spell of the downward trendline incepted since yesterday. It should be noted though that the pair showed some signs of stabilisation during today’s Asian session. Should the pair remain under the selling interest of the market we could see it breaking the 1.3850 (S1) support line and aim for the 1.3750 (S2) support level. On the flip side, should the pair’s long positions be favoured by the market, we could see it breaking the 1.3970 (R1) line and aim for the 1.4050 (R2) level.
Other economic highlights today and early tomorrow
Today the main releases are expected to be the simultaneous releases of the US employment report as well as Canada’s employment data, both for April.
Support: 1.3850 (S1), 1.3750 (S2), 1.3620 (S3)
Resistance: 1.3970 (R1), 1.4050 (R2), 1.4175 (R3)
Support: 0.6490 (S1), 0.6385 (S2), 0.6280 (S3)
Resistance: 0.6615 (R1), 0.6700 (R2), 0.6800 (R3)