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'A strong first indicator on March GDP suggests there could be some decent momentum heading into the second quarter.' - Nick Exarhos, CIBC

Canada's trade deficit narrowed less than expected last month, official figures revealed on Thursday. Statistics Canada reported that the country's trade gap came in at C$0.1B in March, down from the prior month's deficit of C$1.1B. However, the reading missed expectations for a C$0.3B trade surplus. Exports rose 3.8% to C$46.98B, as export volumes and prices climbed 2.5% and 1.3%, respectively. The trade balance report suggested that the economy finished the Q2 of 2017with solid growth. Energy exports contributed most to the March rise, posting a 7.0% gain. Imports rose 1.7% to C$47.11B amid higher inflows of metal and non-metallic products from Japan. In volume terms, imports fell 0.2%, while import prices jumped 1.9%. Higher imports pointed to improvement in business investment and inventories, contributors to GDP growth. In April, the Bank of Canada revised down its export growth forecast to 2.5% over the next three-month period, compared to a 3.0% growth estimate in January due to the high degree of uncertainty in the US and weak global investment.

'The tightening labor market is raising costs but firms are failing to improve productivity to offset those increases. There simply is no reserve army of the unemployed or underemployed to call on and hours worked are already fairly high.' - Joel Naroff, Naroff Economic Advisor

The number of Americans filling for unemployment benefits dropped markedly last week, pointing to the tightening labour market. The Department of Labour reported on Thursday that initial jobless claims fell to 238K in the week ending May 28, the lowest in 17 years, following the preceding week's 257K and topping expectations for a slight decrease to 246K. That marked the 113th week of claims remaining below the 300K level, the longest stretch since 1973. Thursday's data also showed that the number people still receiving unemployment aid dropped 23K to 1.96M in the week ended April 2, the lowest since April 2000. On Wednesday, the Federal Reserve left its monetary policy unchanged but analysts suggested that the tightening labour would likely force the Federal Reserve to raise interest rates at its next meeting in June, with claims below the 300K level and the unemployment rate at a near 10-year low of 4.5%. However, Friday's NFP report is set to paint a better picture of the economy and, therefore, determine the Bank's course. Despite the better-than-expected data, the US Dollar fell against other major currencies.

'...With the inflation environment looking firmer than it has been for the past few years, the RBNZ are likely to give a stronger signal that the next move in interest rates will be up.' - Westpac (based on EconoTimes)

New Zealand's long-term inflation expectations jumped above the RBNZ's target mid-point of 2% in the second quarter of 2017, the latest quarterly survey revealed on Friday. The report suggested the Reserve Bank of New Zealand's two-year inflation expectations soared to 2.2% in the Q2 from 1.92% in the previous quarter, while expectations tracked by the RBNZ's one-year-ahead measure failed to breach the central bank's 2% target, surging to 1.92% from 1.56% listed in the Q1 survey. Meanwhile, data revealed the country's CPI advanced 1.1% in the first quarter, nearly double the rate observed in the final quarter of 2016, being boosted by easy monetary policy. Stronger inflation came as a surprise, as the economy continued to perform relatively mere, expanding just 0.4% in the first three months of 2017. Looking ahead, the country's economic forecast remains quite vigorous, with economists eyeing a better-than-expected growth in New Zealand in the foreseeable future on the back of upbeat inflation and dashingly rising exports, which might compel policymakers to start hiking interest rates within the next 12 months.

Daily Pivots: (S1) 122.85; (P) 123.25; (R1) 123.91; More...

EUR/JPY continues to lose upside moment ahead of 124.08. But there is no clear sign of topping yet. Intraday bias stays on the upside for 124.08 and break will confirm resumption of whole rise from 109.20. Further rally would then be seen to 126.09 key resistance. On the downside, below 122.30 minor support will turn bias neutral first and bring consolidation before staging another rally.

In the bigger picture, focus is back on 126.09 support turned resistance. Decisive break there will confirm completion of the down trend from 149.76. And in such case, rise from 109.20 is at the same degree and should target 141.04 resistance and above. Meanwhile, rejection from 126.09 and break of 114.84 will extend the fall from 149.76 through 109.20 low.

Daily Pivots: (S1) 144.72; (P) 145.22; (R1) 145.80; More....

No change in GBP/JPY's outlook. It continues to lose upside momentum as seen in 4 hour MACD. But there is no clear sign of topping yet. Sustained trading above 144.77 resistance will resume the whole rebound from 122.36 through 148.42 high to 150.42 fibonacci level. On the downside, though, break of 143.79 minor support will indicate short term topping and bring deeper pull back.

In the bigger picture, based on current momentum, rise from 122.36 bottom should be developing into a medium term move. Break of 38.2% retracement of 195.86 to 122.36 at 150.42 should pave the way to 61.8% retracement at 167.78. This will now be the favored case as long as 135.58 support holds.

The pair eased further on Friday after strong bulls failed to clearly break above daily cloud top at 112.86, on spike at 113.04, which was capped by 100SMA.

Bearish close on Thursday with long upper wick on daily candle, weighs on near-term action, however, fresh extension of pullback from 113.04 peak was so far contained by daily cloud base at 112.15, keeping hopes of fresh attempts above the cloud in play.

Risk of deeper pullback remains in play as slow stochastic is reversing from overbought territory and daily RSI is turning south.

Firm break below daily cloud would face a plethora of supports that start with daily 55/weekly Tenkan-sen at 111.80, rising 10 SMA at 111.58 and weekly cloud top/daily Tenkan-sen at 111.36/32, which should contain extended corrective dips.

Only close below the latter would undermine broader bullish structure and signal deeper correction.

Conversely, close above 112.67 (Fibo 61.8% of 115.49/108.11 descend) and daily cloud will be seen as strong bullish signal for further upside.

Res: 112.65, 112.85, 113.04, 113.75
Sup: 112.15, 111.80, 111.58, 111.36

Daily Pivots: (S1) 1.4704; (P) 1.4770; (R1) 1.4887; More...

EUR/AUD's rally continues today and reaches as high as 1.4909 so far. The strong break of 1.4721 key resistance should confirm our bullish view of trend reversal. Intraday bias remains on the upside. Current rise should now target 1.5455 medium term fibonacci level. On the downside, break of 1.4442 support is needed to indicate short term topping. Otherwise, outlook will remains bullish in case of retreat.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Such correction should be completed after defending 1.3671 key support. Rise from 1.3642 is now expected to target 61.8% retracement of 1.6587 to 1.3624 at 1.5455 and above. In any case, outlook will now stay cautiously bullish as long as 1.4309 resistance turned support holds.

'The euro rose versus most G-10 peers as traders appeared to trim bearish bets after a debate between the two French presidential candidates.' – Alexandria Arnold and Dennis Pettit, Bloomberg

Pair's Outlook

The common European currency traded even above the previously expected levels against the US Dollar, as the currency exchange rate was at the 50.00% Fibonacci retracement level on Friday morning. The retracement level is located at the 1.0977 level, and it seems to be providing support for additional Euro gains. The gains are possible, as the upper trend line of the long term ascending channel has been broken due to the recent fundamental changes in Europe. Due to that reason it is possible that the rate will surge above the 1.10 mark by the end of the day.

Traders' Sentiment

SWFX traders remain bearish, as 58% of open positions are short on Friday. Meanwhile, only 51% of trader set up orders are to sell the Euro.

Daily Pivots: (S1) 0.8469; (P) 0.8485; (R1) 0.8514; More...

EUR/GBP is staying in range of 0.8404/0.8529 and intraday bias remains neutral. On the downside, below 0.8404 will turn focus back to 0.8303 low. Break there will extend the whole corrective pattern from 0.9304. On the upside, above 0.8529 will resume the rebound from 0.8312 towards 0.8786 resistance. Overall, price actions form 0.9304 are seen as a corrective pattern and is extending.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. In case of deeper fall, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside. Rise from 0.6935 (2015 low) will resume at a later stage to 0.9799 (2008 high). However, sustained break of 0.8116 could bring deeper decline to next key support level at 0.7564 before the correction completes.

'The rapid deterioration in the UK's economic momentum has largely gone unnoticed by an FX market preoccupied with political distractions.' – GJanes Rossiter (Based on Pound Sterling Live)

Pair's Outlook

GBP/USD opened red on the daily chart Thursday morning, setting a downside target at 1.2829 in sight. The area is represented by the daily S1 and is most likely to be up for solid tests today. Because of the proximity to the area, the cross might lack general volatility today in order to respect the area. In case of severe downside volatility around 15:30 GMT when the US unemployment claims data comes out, 1.2762 might be the level more likely to cut the movement with more demand at 1.2729. Upside risks are currently limited to 1.2898.

Traders' Sentiment

There are 49% of traders holding short positions today (previously 50%), whereas 57% of all pending orders are to acquire the Pound.