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Daily Pivots: (S1) 1.3495; (P) 1.3527; (R1) 1.3576; More...

USD/CAD's rally from 1.3716 resumed by breaking through 1.3613 resistance and intraday bias is back on the upside. Current rise should target channel resistance at 1.3664 first. Sustained break there would prompt upside acceleration towards 1.3897 resistance next. For now, near term outlook will stay bullish as long as 1.3477 support holds, in case of retreat.

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern only. In case of another fall, strong support should emerge above 1.2947 resistance turned support to bring rebound. Overall, larger up trend from 1.2005 (2021 low) is still expected to resume through 1.3976 at a later stage.

Dollar rises broadly in early US session in response to surprisingly strong non-farm payroll data. Dollar's ascent is notably pronounced the Canadian Dollar, which simultaneously grapples with its own disappointing employment figures. But against others, the overall strength of the greenback remains somewhat contained for now. The picture could shift dramatically as the NFP report catalyzes a significant surge in US treasury yields and exerts downward pressure on stock futures. Should the turmoil in stocks and bonds persist, Dollar may well gather substantial momentum later in the session.

As for the week at this point, Australian Dollar remains the standout performer, followed by New Zealand Dollar. Dollar's ascent post-NFP has positioned it as the third strongest currency for the now. Conversely, Canadian Dollar finds itself at the bottom of the performance ladder, with the Swiss Franc not far ahead. Euro and British Pound re mixed, positioned in the middle alongside Japanese Yen. But there is room for the picture to change drastically before weekly close.

In Europe, at the time of writing, FTSE is down -1.00%. DAX is down -1.57%. CAC is down -1.51%. UK 10-year yield is up 0.050 at 4.078. Germany 10-year yield is up 0.0321 at 2.399. Earlier in Asia, Nikkei fell -1.96%. Hong Kong HSI fell -0.01%. China was on holiday. Singapore Strait Times fell -0.52%. Japan 10-year JGB yield fell -0.0066 to 0.771.

US NFP grows 303k in Mar, unemployment rate ticks down to 3.8%

US non-farm payroll employment grew 303k in March, well above expectation of 205k. That's also much higher than the average monthly gains of 231k over the prior 12 months.

Unemployment rate ticked down from 3.9% to 3.8%, below expectation of 3.9%. Participation rate rose from 62.5% to 62.7%.

Average hourly earnings rose 0.3% mom, matched expectations. Over the past 12 months, average hourly earnings have increased by 4.1 yoy.

Canada's employment falls -2.2k, unemployment rate jumps to 6.1%

Canada's employment decreased -2.2k in March, much worse than expectation of 34.5k increase. Unemployment rate jumped from 5.8% to 6.1%, above expectation of 5.9%. Labor force participation rate was unchanged at 65.3%. Average hourly wages rose 5.1% yoy, up from prior month's 5.0% yoy.

Eurozone retail sales falls -0.5% mom in Feb, EU down -0.4% mom

Eurozone retail sales volume fell -0.5% mom in February, worse than expectation of -0.3% mom. Volume of retail trade decreased for food, drinks, tobacco by -0.4% mom, non-food products (except automotive fuel) by -0.2% mom, automotive fuel in specialised stores by -1.4% mom.

EU retail sales fell volume -0.4% mom. Among Member States for which data are available, the largest monthly decreases in the total retail trade volume were recorded in Germany (-1.9%), Belgium (-1.8%) and Cyprus (-1.1%). The highest increases were observed in Poland (+1.4%), Croatia (+1.2%) and Estonia (+1.0%).

BoJ's Ueda: Excessive Yen weakness could prompt monetary policy response

In an interview with The Asahi Shimbun newspaper, BoJ Governor Kazuo Ueda highlighted extended Yen weakness could prompt further rate hikes by the central bank.

"If exchange rate trends have an effect on the cycle between wages and prices that cannot be ignored, that would become a reason for responding to the situation through monetary policy," he explained.

Ueda also outlined other conditions under which BoJ might consider additional rate hikes, after the landmark shift in March which exited negative interest rates.

The decision to end negative interest rates was made with a certain level of confidence, quantified by Ueda as "75 percent." He indicated that an increase in this confidence level to "80 percent or 85 percent" could prompt further adjustments

Governor also touched on factors likely to boost personal consumption, including the government's planned income tax cut in June, expected wage increases, and a slowdown in consumer price inflation. These developments, if they materialize as anticipated, could pave the way for a higher interest rate as early as between summer to autumn.

Moreover, Ueda acknowledged the impact of a "excessively weak yen" on Japan's economy and consumer prices, suggesting that significant currency weakness could influence future decisions regarding interest rate hikes.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.3495; (P) 1.3527; (R1) 1.3576; More...

USD/CAD's rally from 1.3716 resumed by breaking through 1.3613 resistance and intraday bias is back on the upside. Current rise should target channel resistance at 1.3664 first. Sustained break there would prompt upside acceleration towards 1.3897 resistance next. For now, near term outlook will stay bullish as long as 1.3477 support holds, in case of retreat.

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern only. In case of another fall, strong support should emerge above 1.2947 resistance turned support to bring rebound. Overall, larger up trend from 1.2005 (2021 low) is still expected to resume through 1.3976 at a later stage.

Economic Indicators Update

Canada's employment decreased -2.2k in March, much worse than expectation of 34.5k increase. Unemployment rate jumped from 5.8% to 6.1%, above expectation of 5.9%. Labor force participation rate was unchanged at 65.3%. Average hourly wages rose 5.1% yoy, up from prior month's 5.0% yoy.

Full Canada employment release here.

US non-farm payroll employment grew 303k in March, well above expectation of 205k. That's also much higher than the average monthly gains of 231k over the prior 12 months.

Unemployment rate ticked down from 3.9% to 3.8%, below expectation of 3.9%. Participation rate rose from 62.5% to 62.7%.

Average hourly earnings rose 0.3% mom, matched expectations. Over the past 12 months, average hourly earnings have increased by 4.1 yoy.

Full US non-farm payrolls release here.

• EURUSD pulls back from two-week high
• Technical bias is not bearish yet

EURUSD gave up some ground on Thursday after a sharp rally from a one-and-a-half-month low of 1.0723 to a two-week high of 1.0875.

The US nonfarm payrolls report is on the agenda today and investors will look at whether jobs growth slowed down to 212k and wage growth eased to 4.1% y/y as forecasts suggest. The pair might receive some assistance if there are indications of a weakening US labor market, and the near-term technical outlook cannot exclude a shift to a recovery phase.

Both the RSI and the MACD are sloping to the downside, but the former is still above its 50 neutral mark and the latter has yet to cross below its red signal line. Moreover, the stochastic oscillator has already reached its 20 oversold level, suggesting that the bearish action in the price might halt soon.

Adding to the encouraging signals is the progressing bullish cross between the 20- and 50-period simple moving averages (SMAs). The completion could maintain investors’ confidence in the recent positive turnaround.

The support trendline drawn from the lows of this week is currently buffering downside forces around 1.0825, but traders are hoping for a close above the 1.0840 level, where the 20-SMA is placed in the daily chart, to refocus on the descending trendline from March at 1.0884. Breaking above the latter could result in an immediate pause near the psychological level of 1.0900. If not, the recovery could speed up to 1.0935, where the long-term resistance line from May 2021 is positioned.

Should the price drop below 1.0825, the 20- and 50-period SMAs may offer assistance around 1.0800. A continuation lower could initially pause around 1.0780 and then near 1.0760, while a deeper move could set the stage for another battle near the 1.0723 low.

Briefly, EURUSD has started a new negative cycle, but the short-term bias hasn't shifted to the bearish side yet. Nevertheless, a close above 1.0840 will be needed to restore buying interest. 

USDJPY remains within a two-week range and consolidating just under multi-year peaks at 151.90/152.00 zone (tops of Oct 2022 / Nov 2023 / March 2024).

Extended sideways mode (the pair is on track to end the second consecutive week in a tight Doji candle) reflects strong indecision, as the dollar remains supported by a wide gap between Fed and BoJ interest rates, while fears of Japan’s intervention to support weak yen, continue to cap the action.

Technical studies remain bullish on all larger timeframes and strong bullish bias expected while the price stays above broken 150 level, reverted to solid support, however, fundamentals are likely to be pair’s key driver this time.

Markets await release of US March labor data for fresh signals, with US NFP forecasted to increase by 200K in March, compared to 275K increase previous month, with stronger than expected March numbers to be dollar supportive and vice versa.

Initial support lays at 150.40 (20DMA), guarding pivots at 150.00/149.87 (psychological / Fibo 38.2% of 146.48/151.97 upleg), loss of which would shift near-term focus to the downside and expose next strong support at 149.20 (top of thick daily cloud / Fibo 61.8%).

Key barriers lay at 152.00 zone and sustained break here to spark stronger bullish acceleration, though looming intervention is likely to remain a strong obstacle for bulls.

Res: 151.52; 151.97; 152.56; 153.00.
Sup: 150.67; 150.40; 150.00; 149.87.

The Japanese yen showed a bit of strength earlier but has pared these gains. In the European session, USD/JPY is trading at 15141, up 0.04%

All eyes on US nonfarm payrolls

The markets are bracing for a sharp drop in US nonfarm payrolls for March. Job growth hit 353,000 in January but then fell to 275,000 in February and the market estimate for March stands at 200,000. The labour market has stood up well in the face of elevated interest rates but another decline in the March data would indicate a clear downtrend in job growth, which would support the Federal Reserve deciding to lower interest rates sooner rather than later.

When can we expect the Fed to take the plunge and start lowering interest rates? That is a tough one to answer, especially because not all Fed members are on the same page, as evidenced by comments this week. Fed Chair Jerome Powell said that although inflation has been bumpy, he expected the Fed to lower rates “at some point this year”. Cleveland Fed President Loretta Mester echoed this position, saying that the Fed was becoming more confident that it could lower rates in the next few months.

Minneapolis Fed President Neel Kashkari sounded more hawkish, as he questioned if rate cuts were needed this year “if we continue to see inflation moving sideways”. Kashkari does not have a vote on monetary policy but his comments indicate that a rate cut is not a given and will depend on the data, in particular inflation.

In Japan, household spending rebounded in February with a gain of 1.4% y/y, compared to -2.1% in January. This beat the market estimate of 0.5%. On an annualized basis, household spending dropped 0.5%, following a 6.3% decline in January and beating the market estimate of -3%. The 0.5% decline marks a 12th straight drop in household spending but the rebound leaves room for optimism.

USD/JPY Technical

• USD/JPY is testing resistance at 151.41. Above, there is resistance at 151.71
  There is support at 151.06 and 150.76

The Canadian dollar is slightly lower on Friday. In the European session, USD/CAD is trading at 1.3559, up 0.12%.

Canada and the US will both release employment data later today, which could mean some volatility from USD/CAD in the North American session.

Employment in Canada is expected to drop to 25,000 in March, a significant decline from the February gain of 40,700. The labour market remains in good shape but Canada’s rapid population growth has pushed the unemployment rate higher. The unemployment rate rose to 5.8% in February, up from 5.7% a month earlier and is expected to rise again to 5.9% in March.

US nonfarm payrolls expected to slip

The markets are bracing for a sharp drop in US nonfarm payrolls for March. Job growth hit 353,000 in January, but then fell to 275,000 in February and the market estimate for March stands at 200,000. The labour market has stood up well in the face of elevated interest rates but another decline in the March data would indicate a clear downtrend in job growth, which would support the Federal Reserve deciding to lower interest rates sooner rather than later.

All eyes are on the Fed in anticipation of a rate cut later this year, but the Fed’s message this week has not been uniform. Fed Chair Jerome Powell said that although inflation has been bumpy, he expected the Fed to lower rates “at some point this year”. Cleveland Fed President Loretta Mester echoed this position, saying that the Fed was becoming more confident that it could lower rates in the next few months.

Contrast that stance with that of Minneapolis Fed President Neel Kashkari, who questioned if rate cuts were needed this year “if we continue to see inflation moving sideways”. Kashkari does not have a vote on monetary policy but his comments indicate that a rate cut is not a done deal and will depend on the data, in particular inflation.

USD/CAD Technical

• USD/CAD tested resistance at 1.3576 earlier. Then next resistance line is 1.3608
• 1.3527 and 1.3495 are providing support

On March 18, we wrote about the activation of bears near the USD 70,000 level and the likelihood of consolidation forming near this psychological mark.

On March 25, we wrote that anxiety remains in the Bitcoin market.

Technical analysis of the BTC/USD chart with new data on the behavior of Bitcoin prices today relative to the previously designated levels and lines shows that bearish arguments are becoming more convincing:

→ the median line of the ascending channel acted as resistance (shown by the first arrow);

→ the price has formed a consolidation zone (shown in green) with a subsequent bearish exit from it;

→ after a bearish breakdown of the lower border of the ascending channel, it showed signs of resistance (shown by the second arrow);

→ the increase in B→C is about 50% of the decrease in A→B, which corresponds to the proportion of the normal intermediate recovery within the dominant bearish trend.

Attempts to reach the level of USD 70k for Bitcoin in April were unsuccessful. The inability of the cryptocurrency price to demonstrate bullish dynamics is alarming due to the approaching halving, which is considered a positive factor influencing the price of Bitcoin.

It is possible that further developments will provide more turning points for building a downward channel.

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After three days of significant gains, the Australian dollar is retreating against its American counterpart, with the AUD/USD pair falling to 0.6573.

The US dollar has rebounded after Federal Reserve officials expressed doubts about an immediate monetary policy easing. The discussion around interest rates and the timing of their reduction has become a central topic in the market. Signals that the Fed is prepared to cut rates three times this year, making borrowing costs more affordable, have put pressure on the US dollar, allowing other currencies to recover. However, signs that the Federal Reserve is still awaiting more data before deciding have led to a rebound in the USD and a decline in overall market sentiment.

Australia's statistical data revealed that import volumes grew by 4.8% month-over-month in February, compared to a previous increase of 1.4%. Export volumes decreased by 2.2% month-over-month, with January's figure at 1.5%. The positive trade balance in February was the lowest in five months, primarily due to a drop in overseas shipments of iron ore.

For the third consecutive meeting, the Reserve Bank of Australia (RBA) has left the interest rate unchanged at 4.35% annually, its highest level in 12 years. Meanwhile, the RBA has omitted any mention of potential rate hikes from its comments, confident in reducing inflationary pressure. This has led to forecasts that borrowing costs in Australia may decrease later this year.

Technical analysis of AUD/USD

On the H4 chart of AUD/USD, a downward wave to 0.6480 and a correction to 0.6617 have been completed. We expect the start of a new decline to 0.6422. The first structure of the decline is forming today, targeting 0.6520. After completing this, we anticipate a consolidation range. Exiting this range downward could lead to a wave towards 0.6472, potentially extending the trend down to 0.6422. The MACD indicator, with its signal line below zero, supports this scenario, expecting new lows.

On the H1 chart of AUD/USD, a downward wave structure to 0.6520 is forming. Following this, a correction to 0.6572 is anticipated, and a decline to 0.6490, with the trend continuing to 0.6422, is expected. The Stochastic oscillator, with its signal line currently below 20 but poised to rise to 50, technically supports this scenario.