US employment report failed to support USD

April’s US employment report had little effect on the USD as such, despite data coming out better than expected and showing a considerably tighter US employment market which in turn may allow the Fed to lean on the hawkish side. For the time being, we note that St. Louis Fed President Bullard on Friday, highlighted that the US employment market needs to cool off and that the Fed’s last rate hike was a good “next step” yet failed to indicate if he would favour the Fed to hike rates further. Also, we note that he tried to play down market worries for the US banking sector as he stated that recent bank stresses “can be managed”. Overall, the Fed’s intentions tend to remain a key driver for market movements, yet in the US also worries about the banking sector, especially regional banks, are elevated, as are worries for a possible default of the US government, all weighing on the greenback. It should be noted that despite the USD not rising considerably, gold’s price plunged while US stock markets ended Friday in the greens implying a more optimistic tone in the market sentiment. Today, given the lack of high-impact financial releases and earnings report releases of high-profile companies, we expect fundamentals to be in the driver’s seat for the markets’ direction. Back in the FX market and north of the US border, we note that also Canada’s employment data for April were better than expected which may have enhanced BoC’s hawkishness and provided support for the Loonie. The CAD may also have made some gains due to the rise in oil prices on Friday, as the market worries for a possible recession seemed to have eased a bit.

USD/CAD plunged yesterday breaking the 1.3465 (R1) support line now turned to resistance. We tend to maintain a bearish outlook for the pair, as long as its price action remains below the downward trendline incepted since the 4^th of May. Please note that the RSI indicator has dropped below the reading of 30 showcasing the bearish sentiment of the market yet may also be implying that the pair has reached oversold levels and may be about to correct higher. It should be noted that the drop has slowed down after breaking the lower Bollinger band, yet the price action, has returned with the Bollinger boundaries, that may allow for some room for the bears to play. Should the bears maintain control over the pair’s direction, we may see it breaking the 1.3335 (S1) support line and aim for the 1.3230 (S2) support hurdle. Should the bulls take over, we may see the pair breaking the downward trendline, in a first sign that the downward motion has been interrupted and move above the 1.3465 (R1) resistance line, paving the way for the 1.3560 (R2) level.

USD/CNH maintain a sideways motion between the 6.9270 (R1) resistance line and the 6.9880 (S1) support level. We tend to maintain our bias for the rangebound movement of the pair to continue given also that the RSI indicator continues to run just below the reading of 50 implying a rather indecisive market for now. Should the pair find fresh extensive buying orders along its path, we may see the pair breaking the 6.9270 (R1) resistance line and aim for the 6.9640 (R2) resistance level. Should a selling interest be expressed by the market, we may see USD/CNH breaking the 6.9880 (S1) support line and aim for the 6.8625 (S2) support level.

Other highlights for the day:

During today’s European session, we note the release of Germany’s industrial output for March and the Eurozone’s Sentix index for May. In tomorrow’s Asian session, we note the release of New Zealand’s electronic card retail sale for April, Japan’s All household spending for March and China’s trade data for April.

As for the rest of the week:

On Wednesday we note Norway’s CPI rates for April and we highlight the important US CPI rates for April. On Thursday, we get Japan’s Current Account balance for March, China’s inflation metrics for April, the Czech Republic’s CPI rate for April, the US Weekly Initial Jobless Claims figure and PPI rates for April, while on the monetary front we highlight BoE’s interest rate decision. On Friday, we get UK’s Manufacturing Output for March and preliminary GDP rates for Q1, Norway’s GDP rate for Q1 and the US Preliminary University of Michigan Consumer sentiment figure for May.

USD/CAD H4 Chart

Support: 1.3335 (S1), 1.3230 (S2), 1.3135 (S3)

Resistance: 1.3465 (R1), 1.3560 (R2), 1.3655 (R3)

USD/CNH H4 Chart

Support: 6.8980 (S1), 6.8625 (S2), 6.8290 (S3)

Resistance: 6.9270 (R1), 6.9640 (R2), 6.9950 (R3)

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