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The Canadian dollar is almost unchanged on Friday. USD/CAD is up 0.03%, trading at 1.3680 in the European session at the time of writing.

Canada’s job growth expected to rebound

Canada releases the April employment report later today. The economy shed 2200 jobs in March, a shocking figure as the market forecast stood at a gain of 25,900. Job growth is expected to get back on track, with an estimate of 18,000. The unemployment rate has been high and is expected to creep up to 6.2%, compared to 6.1% in March. Wage growth, an important driver of inflation, is expected to tick lower to 4.9% in April, down from 5% in March.

The Bank of Canada has kept rates unchanged at 5% for a sixth straight time at the April meeting, and is under pressure to ease rates as inflation falls lower. The BoC remains cautious, however, as policy makers are reluctant to lower rates before they are confident of sustainable price stability around the 2% inflation target. At the press conference after the April announcement, Governor Macklem said that a June rate cut was “within the realm of possibilities”, which wasn’t much of an endorsement.

The BoC would prefer not to cut before the Federal Reserve, since that would push the Canadian dollar lower and likely boost inflation. At the same time, the BoC is under pressure to ease the pain of households which have been hit hard by elevated rates and will likely press the rate trigger ahead of the Fed if it feels that inflation is low enough.

It’s a light data calendar in the US, with UoM Consumer Sentiment the sole tier-1 event. The index is expected to drop to 76.0 in May, down from 77.2 in April.

USD/CAD Technical

• USD/CAD is putting pressure on resistance at 1.3699. Above, there is resistance at 1.3723
• 1.3651 and 1.3627 are providing support

Yesterday, the Bank of England published its interest rate decision. According to ForexFactory, the votes were distributed as follows:

→ rate hike - 0 votes, cut - 2 votes, unchanged - 7 (0 - 2 - 7);

→ forecast: 0 - 0 - 9;

→ previous values: 0 - 1 - 8.

For the first time in the current cycle of interest rate hikes aimed at inflation lowering, two members of the Monetary Policy Committee voted in favour of the rate cut. The dovish tone was echoed by Bank of England Governor Andrew Bailey: “It is likely that we will need to cut the bank rate over coming quarters, possibly more so than is currently priced into markets.”

The market's first reaction to the clear signals of the imminent easing monetary policy was the weakening of the pound, including against the US dollar. Thus, yesterday, the GBP/USD rate dropped below the low of April 26 at around 1.245.

However:

→ the US dollar is also affected by the prospect of the Fed's easing monetary policy because the current tight policy puts pressure on the labour market - according to data from May 9, the number of applications for unemployment benefits in the US was the highest since November 2023;

→ Today's UK GDP data (which turned out to be better than expected) supported the pound.

As a result, today, the GBP/USD rate surged to 1.2537 from yesterday's low below 1.2450.

Technical analysis of the GBP/USD chart shows:

→ the price is within the channel (shown in blue);

→ the median line (as shown by the arrow) acts as resistance - a long upper shadow can be interpreted as evidence of sellers' activity above 1.26;

→ recent events have shown the presence of demand in the area of ​​the psychological level of 1.25.

Thus, fluctuations in the GBP/USD rate may continue to compress within the formation between the trendline – resistance – (shown in red) and support around 1.25. The exit from this consolidation pattern may develop into a stable trend against the background of prospects for lowering interest rates by central banks.

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The British pound is drifting on Friday. GBP/USD is up 0.05%, trading at 1.2531 in the European session at the time of writing.

UK GDP rises 0.6%

The British economy grew by 0.6% q/q in the first quarter, higher than the market estimate of 0.4% and above the Q4 2023 decline of 0.3%. This marks a rebound after a mild recession in the second half of 2023. GDP posted its best quarterly growth since Q4 of 2021and was driven by increased expansion in the services sector. On a monthly basis, GDP rose 0.4% in March, up from 0.2% in February and above the forecast of 0.1%. This was its best performance in nine months. The British pound showed little reaction to the GDP data.

The positive GDP report is unlikely to change the BoE’s rate path, which admittedly isn’t all that clear. The modest economic turnaround in the first quarter isn’t expected to be inflationary, which leaves the BoE on course to lower rates later this year.

The Bank of England maintained the cash rate at 5.25% at yesterday’s meeting. The markets were hoping for a signal of a rate cut in June, but Governor Bailey didn’t play along, saying that the central bank needed to see more evidence that inflation will remain low prior to cutting rates. Bailey added he was “optimistic that things are moving in the right direction”, which could be a signal that rate cuts are on the way. The markets have priced a June cut at around 50% and have fully priced a cut in August.

It’s a light data calendar in the US, with UoM Consumer Sentiment the sole tier-1 event. The index is expected to drop to 76.0 in May, down from 77.2 in April.

GBP/USD Technical

• There is support at 1.2499 and 1.2471
• 1.2552 and 1.2580 are the next resistance lines

• AUDUSD repeatedly fails to conquer the 0.6643-0.6666 range
• But outlook is positive as price holds above 50 and 200-day SMAs
• Momentum indicators deteriorate but remain in positive zones

AUDUSD has been in a steady advance since its bounce off the five-month low of 0.6363 in mid-April. Although the pair has been rejected at the 0.6643-0.6666 range three times so far in 2024, the bulls do not seem ready to give up.

If buying pressures persist, the price may initially test the recent rejection region of 0.6643, which also held its ground in early April. A break above that zone could set the stage for the 2024 peak of 0.6666. Even higher, the December-January resistance territory of 0.6726 could prevent further upside attempts.

On the flipside, should the pair reverse lower, the recent support of 0.6558 could act as the first line of defence. In case of a downside violation, the bears may attack the February-March support of 0.6479. Failing to halt there, the price might challenge the February bottom of 0.6441.

In brief, AUDUSD has repeatedly failed to conquer the congested 0.6643-0.6666 region, but the technical picture remains bullish as the price holds above both its 50 and 200-day simple moving averages (SMAs).

• USDCAD may retest the uptrend line
• MACD and RSI lose steam

USDCAD is sliding beneath the 20-day simple moving average (SMA) and is approaching the medium-term ascending trend line around the 1.3630-1.3610 support region.

Technically, the MACD oscillator is holding beneath its trigger line in the positive area; however, the RSI is weakening and is moving horizontally near the neutral threshold of 50.

In case of steeper decreases the market may rest near the 50-day SMA at 1.3618 and any movements below the 1.3610 region could open the way for challenging the 200-day SMA at 1.3565. Even lower, the outlook could switch to negative, hitting the 1.3455 hurdle.

On the other hand, a climb beyond the 20-day SMA could endorse the bullish structure, meeting the immediate resistance at 1.3785 and the previous peak of 1.3845. If the bulls extend the bullish move, then the price could rally towards the 13-month high of 1.3900.

Summarizing, the current picture of USDCAD is positive unless the price plunges below the 200-day SMA.

Daily Pivots: (S1) 1.0742; (P) 1.0764; (R1) 1.0803; More...

Intraday bias in EUR/USD stays neutral at this point. Further rally is expected as long as 55 4H EMA (now at 1.0741) holds. On the upside, above 1.0810 will resume the rebound from 1.0601 to 1.0884 resistance next. However, firm break of 55 4H EMA will argue that the rebound has completed, and turn bias to the downside for 1.0648 support instead.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern. Fall from 1.1138 is seen as the third leg and could have completed. Firm break of 1.1138 will argue that larger up trend from 0.9534 (2022 low) is ready to resume through 1.1274 high. On the downside, break of 1.0601 will extend the corrective pattern instead.

Daily Pivots: (S1) 1.2471; (P) 1.2499; (R1) 1.2552; More...

Intraday bias in GBP/USD remains neutral at this point, as it recovered after dipping to 1.2445. Strong bounce from current level will retain near term bullishness. Further break of 1.2633 will resume the rebound from 1.2298 to 1.2708 resistance next. However, firm break of firm break of 1.2445 will indicate that this rebound has completed, and revive near term bearishness. Retest of 1.2298 should then be seen in this case.

In the bigger picture, price actions from 1.3141 medium term top are seen as a corrective pattern. Fall from 1.2892 is seen as the third leg which might have completed already. Break of 1.2892 resistance will argue that larger up trend from 1.0351(2022 low) is ready to resume through 1.3141. Meanwhile, break of 1.2298 support will extend the corrective pattern instead.

Daily Pivots: (S1) 0.9042; (P) 0.9071; (R1) 0.9087; More....

Intraday bias in USD/CHF remains neutral at this point, and outlook is unchanged. Further decline is in favor as long as 55 4H EMA (now at 0.9091) holds. On the downside, break of 0.9005 and sustained trading below 55 D EMA (now at 0.9004) will bring deeper fall to 38.2% retracement of 0.8332 to 0.9223 at 0.8883. However, firm break of 55 4H EMA will suggest that the pull back has completed, and bring stronger rebound to retest 0.9223 high.

In the bigger picture, price actions from 0.8332 medium term bottom are tentatively seen as developing into a corrective pattern to the down trend from 1.0146 (2022 high). Rejection by 0.9243 resistance, followed by sustained break of 38.2% retracement of 0.8332 to 0.9223 at 0.8883 will strengthen this case, and maintain medium term bearishness. However, decisive break of 0.9243 will argue that the trend has already reversed and turn medium term outlook bullish for 1.0146.

Daily Pivots: (S1) 155.12; (P) 155.54; (R1) 155.91; More...

Intraday bias in USD/JPY remains mildly on the upside for the moment. Rebound from 151.86 is seen as the second leg of the corrective pattern from 160.20 high. Further rise would be seen to 157.98 resistance. On the downside, below 154.23 minor support will turn intraday bias neutral.

In the bigger picture, a medium term top might be formed at 160.20. But as long as 150.87 resistance turned support holds, fall from there is seen as correcting rise from 150.25 only. However, decisive break of 150.87 will argue that larger correction is possibly underway, and target 146.47 support next.

Daily Pivots: (S1) 0.6583; (P) 0.6603; (R1) 0.6639; More...

Intraday bias in AUD/USD remains neutral for the moment. Further rise is in favor as long as 55 4H EMA (now at 0.6570) holds. Above 0.6645 will resume the rebound from 0.6361. On the downside, however, firm break of 55 4H EMA will bring deeper fall back to 0.6464 support instead.

In the bigger picture, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern to the down trend from 0.8006 (2021 high). Fall from 0.7156 (2023 high) is seen as the second leg, which could still be in progress. Overall, sideway trading could continue in range of 0.6169/7156 for some more time. But as long as 0.7156 holds, an eventual downside breakout would be mildly in favor.