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Tariff Wars Made Dollar a Risky Asset
The fall in the U.S. dollar accelerated at the start of April as the shock of trade tariffs caused capital flight from U.S. assets. We don’t know yet how long this trend will be. In finance, it is often said, “America sneezes, and the world gets a fever.” Even if the problems originated in the US, the impact on the markets of other countries will be more substantial.
Dollar Index confirmed the prevailing downtrend.
The dollar index moved sharply below its previous support, confirming the prevailing downtrend. The technical target of the current drop now looks like the area from 99 to 100. The lower boundary represents the Fibonacci extension of the first impulse. The upper boundary passes through the psychologically significant round level, which stopped the dollar’s decline in September-October last year.
Among the dollar’s competitors, the euro and the yen are the biggest gainers so far. These are the next two largest capital markets after the dollar, where investors are hoping to weather the storm. The euro returned to local highs against the dollar and the pound. EURUSD has also been near the upper boundary of the trading range for the last three years, and it is ready to break it and move further up.
Canada Sheds Jobs in March as Tariffs Issue Their First Blow
The Canadian labour market shed 32.6k positions in March, driven by a decline full-time positions (-62k).
Job losses pushed the unemployment rate up 0.1 percentage point (ppt) to 6.7%. The labour force participation rate decreased by 0.1 ppt to 65.2%.
Employment by sector showed declines in trade exposed wholesale and retail trade sector (-29k), as well as culture and recreation (-20k). Personal and repair services saw a decent job gain of +12k.
Lastly, total hours worked recovered from a bad weather-induced fall in February (+0.4% on the month, from -1.3%). Meanwhile wages were up a stable 3.6% year-on-year (from 3.8% in February).
Key Implications
Has it begun? The impact of trade tariffs appears to be working its way through the economy. Businesses and consumers are naturally hesitant in the face of heightened political uncertainty. Today's report reflects this, with full-time jobs in the cyclically sensitive private sector driving the losses. Those that lose their jobs are also taking longer to find work, a sign that the Canadian labour market is starting to loosen in response to the imposition of tariffs.
The Bank of Canada is increasingly likely to cut its policy rate further. While pricing for April is still undecided, we think the bank should keep cutting by at least another 50 bps (cumulative) over the coming months in order to cushion the blow from tariffs. Today's discouraging jobs report showcases the downside risks to the economy, which warrants further action from the BoC.
US: Payrolls Jump in March, While Unemployment Rate Ticks Up to 4.2%
The U.S. economy added 228k jobs in March, well above the consensus forecast of 140k. Payroll figures for the prior two months were revised lower by a total of 48k jobs.
- For the first quarter, payrolls gained 456k, down from Q4-2024's 656k pace.
Private payrolls rose 209k – well above February's 117k – with the largest gains seen in health care & social assistance (+78k), leisure & hospitality (+43k), transportation & warehousing (+22.9k), retail trade (+23.7k). Government hiring added 19k new positions last month, but all were concentrated at the state & local level. Federal hiring was lower by 4k.
In the household survey, civilian employment (+201k) rose by slightly less than the labor force (+232k), pushing the unemployment rate up to its post-pandemic high of 4.2% (from 4.1% in February). Meanwhile, the broader U-6 measure of unemployment, which includes those working part-time for economic reasons and who are marginally attached to the labor force, fell to 7.9%, after reaching a three-year high of 8.0% in February.
Average hourly earnings (AHE) rose 0.3% month-on-month (m/m) – up from a downwardly revised 0.2% m/m gain in February. The twelve-month change slipped to 3.8% (from 4.0% the month prior).
Aggregate weekly hours rose 0.2% m/m, following a gain of 0.3% m/m in February.
Key Implications
Non-farm payrolls surprised all expectations, coming in well above the consensus forecast and surpassing each of the two prior months job gains by a little over 100k. Some of this is likely payback from January/February, where bad weather and the wildfires in California may have weighed on hiring activity. But given the ongoing efforts to shrink the federal government and rising trade uncertainty, we suspect that job growth is likely to soften over the coming months.
This week's reciprocal tariff announcement marks a significant escalation in trade tensions, and has sparked fears that the U.S. economy is headed for a recession. Longer-term Treasury yields have fallen by over 35 basis points in recent days, with the 10-year currently sitting at 3.93%. Since releasing our Quarterly Forecast on March 18th, we've already marked down our 2025 GDP forecast by 0.6 percentage points to 1.3%. But this assumes the current tariffs are only in effect for six-months, after which most countries/regions see some reprieve. Should the tariffs remain elevated for longer, the odds of the U.S. economy slipping into a recession start to increase. Fed Chair Powell is on deck to speak later this morning, let's see if he can help to calm unnerved financial markets.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.0855; (P) 1.1001; (R1) 1.1196; More...
Intraday bias in EUR/USD is turned neutral with current retreat and some consolidations would be seen first. Downside of retreat should be contained above 1.0731 support to bring another rally. Break of 1.1145 temporary top will target 1.1274 key resistance, and probably further to 100% projection of 1.0358 to 1.0953 from 1.0731 at 1.1326.
In the bigger picture, prior strong break of 55 W EMA (now at 1.0692) suggests that fall from 1.1274 (2024 high) has completed as a three wave correction to 1.0176. Rise from 0.9534 is still intact, and might be ready to resume. Decisive break of 1.1274 will target 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. Also, that will send EUR/USD through a multi-decade channel resistance will carries larger bullish implication. This will now be the favored case as long as 1.0731 support holds.
GBP/USD Mid-Day Outlook
Daily Pivots: (S1) 1.2980; (P) 1.3094; (R1) 1.3215; More...
Intraday bias in GBP/USD remains neutral first and more consolidations would be seen below 1.3206. Downside of retreat should be contained above 1.2878 support to bring another rally. Break of 1.3206 will resume the rise from 1.2099 to 61.8% projection of 1.2248 to 1.3013 from 1.2878 at 1.3351.another rally. However, considering bearish divergence condition in 4H MACD, break of 1.2878 will indicate short term topping, and turn bias back to the downside.
In the bigger picture, up trend from 1.3051 (2022 low) is not completed. Resumption is expected after corrective pattern from 1.3433 completes. Next target will be 1.4248 key resistance (2021 high). This will now remain the favored case as long as 1.2099 support holds.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 0.8483; (P) 0.8658; (R1) 0.8769; More…
Intraday bias in USD/CHF remains on the downside for the moment. Current fall from 0.9196 is in progress for 100% projection of 0.9196 to 0.8757 from 0.8854 at 0.8415. On upside, above 0.8617 minor resistance will turn intraday bias neutral and bring consolidations. But recovery should be limited below 0.8757 support turned resistance to bring another fall.
In the bigger picture, rejection by 0.9223 key resistance keep medium term outlook bearish. That is, larger fall from 1.0342 (2017 high) is not completed yet. Firm break of 0.8332 (2023 low) will confirm down trend resumption. Next target is 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9196 at 0.8075.
USD/JPY Mid-Day Outlook
Daily Pivots: (S1) 144.41; (P) 146.86; (R1) 148.53; More...
No change in USD/JPY's outlook and intraday bias stays on the downside. Current fall from 158.86 is in progress for 61.8% projection of 158.86 to 146.52 from 151.20 at 143.57. On the upside, above 146.76 minor resistance will turn intraday bias neutral and bring consolidations first. But recovery should be limited below 151.20 resistance to bring another fall.
In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low), with fall from 158.86 as the third leg. Strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.
USD/CAD Mid-Day Outlook
Daily Pivots: (S1) 1.3978; (P) 1.4148; (R1) 1.4269; More...
USD/CAD rebounded ahead of 61.8% projection of 1.4791 to 1.4150 from 1.4414 at 1.4018, and intraday bias is turned neutral. For now, risk will remain on the downside as long as 1.4414 resistance holds. Break of 1.4026 will target 1.3946 key support next. Nevertheless, break of 1.4414 will indicate that fall from 1.4791 has completed as a correction only.
In the bigger picture, focus is now on 1.3976 resistance turned support (2022 high), which is close to 55 W EMA (now at 1.3986). Sustained break there should confirm medium term topping at 1.4791. Deeper correction would be seen to 38.2% retracement of 1.2005 (2021 low) to 1.4791 at 1.3727.
AUD/USD Mid-Day Report
Daily Pivots: (S1) 0.6240; (P) 0.6315; (R1) 0.6403; More...
AUD/USD's steep decline today and breach of 0.6087 support indicates resumption of whole fall from 0.6941. Intraday bias is back on the downside. Next target is 61.8% projection of 0.6941 to 0.6087 from 0.6388 at 0.5860. On the upside, above 0.6154 minor resistance will turn intraday bias neutral and bring consolidations first.
In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 0.6388 resistance holds.
China Retaliates, Risk Sentiment Collapses as Market Turmoil Deepens
Risk aversion deepened across global markets today as China unveiled a forceful response to the sweeping US tariffs announced earlier this week. Beijing will impose an additional 34% tariff on all US goods starting April 10, in a move that effectively escalates the trade war into a full-scale economic confrontation. China sent the signal that it's prepared to endure economic pain to counter US pressure. The Chinese Commerce Ministry justified the decision on grounds of national security and international obligations, but the timing and scope leave no doubt it’s a retaliatory measure.
US stock futures plunged in response, with DOW pointing to another 1000-point drop at the open. Wall Street’s mood was already fragile after a volatile week driven by tariff headlines, and the market’s inability to find relief even after a much stronger-than-expected non-farm payrolls report highlights the depth of the panic. Traders are rushing into US Treasuries, pushing the 10-year yield below the key 3.9% level, a sign of rising demand for safe havens amid intensifying uncertainty.
In the currency markets, Aussie has taken the hardest hit, tumbling sharply after China’s retaliation was announced. Kiwi followed as the second-worst performer. Loonie also weakened notably after domestic employment data showed a surprise job loss in March, though it remains a distant third among the day’s laggards.
On the flip side, Swiss Franc extended its stellar run to lead the pack again today. Yen is also well supported, though not quite matching the Franc’s gains. Euro remains relatively firm, continuing to draw strength as a liquid alternative to Dollar amid global uncertainty. Meanwhile, Sterling and Dollar are holding in the middle of the pack.
In Europe, at the time of writing, FTSE is down -3.50%. DAX is down -3.46%. CAC is down -3.22%. UK 10-year yield is down -0.092 at 4.439. Germany 10-year yield is down -0.145 at 2.511. Earlier in Asia, Nikkei fell -2.75%. Japan 10-year JGB yield fell -0.195 to 1.156. Singapore Strait Times fell -2.95%. Hong Kong and China were on holiday.
US NFP grows 228k, unemployment rate ticks up to 4.2%
US labor market showed unexpected strength in March, with non-farm payrolls rising by 228k, well above the consensus estimate of 128k. Growth was also notably stronger than the prior 12-month average of 158k.
The robust job gains highlight continued resilience in hiring, even amid heightened uncertainty surrounding trade policies and financial conditions.
Unemployment rate ticked up slightly from 4.1% to 4.2%, marking the upper end of its recent range, though the increase was accompanied by a modest uptick in labor force participation to 62.5%.
Average hourly earnings rose 0.3% month-over-month, aligning with expectations, suggesting that wage pressures remain steady.
Canada posts surprise -32.6k job loss
Canada’s labor market delivered a sharp disappointment in March, with employment falling by -32.6k, well below expectations of a 10.4k gain.
This marked the first monthly job loss since January 2022 and was driven by a steep decline in full-time positions, which dropped by 62k. Employment rate dipped 0.2 percentage points to 60.9%.
The unemployment rate ticked up to 6.7%, in line with expectations. Wage growth slowed to 3.6% yoy from 3.8% yoy in February.
BoJ's Ueda: US tariffs likely to pressure Japan’s economy
BoJ Governor Kazuo Ueda warned that the 24% tariffs imposed by the US on Japanese goods could have broad implications. He emphasized that heightened uncertainty over the economic outlook may weigh on corporate sentiment and trigger volatile market behavior. This, in turn, could place "downward pressure on global and Japanese economies".
Meanwhile, Ueda noted that the effect on inflation remains uncertain, as the tariffs could either suppress prices by weakening demand or push them higher through supply chain disruptions.
Despite these concerns, Ueda maintained a cautiously optimistic view on Japan’s economy. He pointed out that corporate sentiment remains positive, and capital expenditure plans are stronger than in the same period of prior years.
He referred to the latest Tankan survey as supportive of BoJ's baseline view that Japan’s economy is "recovering moderately". Still, Ueda noted that the survey, conducted from late February to March 31, may not have fully captured the impact of the US tariff announcements.
BoJ Deputy Governor Shinichi Uchida, also speaking at the session, reiterated that the central bank remains committed to adjusting rates if the likelihood of achieving its 2% inflation target increases.
Uchida emphasized that future policy decisions will be made on a meeting-by-meeting basis, based on updated forecasts, "without any preconception".
AUD/USD Mid-Day Report
Daily Pivots: (S1) 0.6240; (P) 0.6315; (R1) 0.6403; More...
AUD/USD's steep decline today and breach of 0.6087 support indicates resumption of whole fall from 0.6941. Intraday bias is back on the downside. Next target is 61.8% projection of 0.6941 to 0.6087 from 0.6388 at 0.5860. On the upside, above 0.6154 minor resistance will turn intraday bias neutral and bring consolidations first.
In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 0.6388 resistance holds.