May’s US employment report to shake the markets

The USD tended to remain relatively unchanged against its counterparts yesterday in a rather quiet Thursday. Today we highlight the release of US employment report for May. The Non-Farm Payrolls figure is expected to rise to 185k if compared to April’s 175k, while the unemployment rate is expected to remain unchanged at 3.9% and the average earnings growth rate also to remain at 3.9% yoy. Should the actual rates and figures meet their respective forecasts, it could be implying a pause in the loosening of the US employment market, which in turn could allow for the Fed to maintain high rates for longer and thus could provide some support for the USD. Hence we may see the release getting additional attention especially should the actual rates and figures deviate from the forecasts as the market will have to readjust its position and given the release of the Fed’s interest rate decision next Wednesday. Please note that the release may have ripple effects beyond the FX market and signals of a possibly tight US employment could weigh on US stockmarkets and gold’s price.

USD/JPY edged lower yesterday yet remained well within the boundaries set by the 156.55 (R1) resistance line and the 153.80 (S1) support line. We note some fatigue on behalf of the bulls for the pair, given the relative flattening of the 20 moving average (MA, blue line) which is also the median of the Bollinger bands and given also that the RSI indicator remains near the reading of 50 implying a rather indecisive market. Hence we tend to maintain a bias for a sideways motion yet also note that the price action remains well within the boundaries of the upward channel dictating its motion since the beginning of the year. Should the bulls regain control over the pair, we may see it breaking the 156.55 (R1) resistance line and taking aim of the 158.35 (R2) resistance hurdle, yet that would mean that the pair is reentering the zone at which a market intervention by Japan is quite possible. Should the bears take over, we may see the pair breaking the lower boundary of the prementioned upward channel, signaling an interruption of the upward motion, breaking also the 153.80 (S1) support line and aim for the 151.90 (S2) support level.

At the same time as the US employment report for May we also get Canada’s employment data for the same month. The unemployment rate is expected to tick up to 6.2% if compared to April’s 6.1% and the employment change figure is expected to drop to 27.5k if compared to April’s 90.4k. Overall and despite a correction of the employment change figure being understandable after April’s stellar 90.4k, the data tend to point towards an easing of the Canadian employment market for the past month that could weigh on the Loonie, given also that such rates and figures could add more pressure on BoC to start cutting rates rather earlier than later. Furthermore, we also note that oil prices continued to rise for a second day yesterday and should oil prices continue to rise today, we may see them providing some support for the Loonie, given also that Canada is a major oil-producing economy.

USD/CAD edged lower remaining well within the boundaries set by the 1.3610 (S1) support line and the 1.3755 (R1) resistance line. We tend to expect a continuance of the pair’s sideways motion within the prementioned boundaries given also that the RSI indicator continues to run along the reading of 50. For a bullish outlook, we would require the pair to break the 1.3755 (R1) resistance line and the pair to aim for the 1.3895 (R2) resistance level. Should a selling interest be expressed by the market we may see USD/CAD breaking the 1.3610 (S1) support line and aim for the 1.3460 (S2) support base.

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Today we note the release of Germany’s Trade data for April, UK’s Halifax House prices for May, Eurozone’s revised GDP rates for Q1. On the monetary front, we note that BuBa President Nagel, ECB’s Schnabel, Holzman and Centeno, ECB President Christine Lagarde and Fed Board Governor Cook speak. On Monday we get Japan’s current account balance for April and revised GDP rate for Q1.