Dollar Dives Against Euro, Swiss and Yen as Non-Farm Payroll Grew Only 138k in May

Dollar dives sharply in early US session after disappointment from employment data. Non-farm payroll report showed only 138k growth in May, well below expectation of 185k. Prior month’s figure was revised down from 211k to 174k. Unemployment rate, though, dropped to 4.3%, lowest since 2001. Average hourly earnings grew 0.2% mom, meeting expectation. But prior month’s figure was also revised down from 0.3% mom to 0.2% mom. Also released, US trade deficit widened to USD -47.6b in April. Canada trade deficit narrowed to CAD -0.9b in April. Canada labor productivity rose 1.4% qoq in Q1.

EUR/USD surges through recent high at 1.1267 after the release, resuming near term rally and is having 1.1298 key resistance in focus. USD/CHF extends the current decline to as low as 0.9653 so far. Meanwhile, 10 year yield drops sharply through key near term support of 2.177. Gold jumps sharply to as high as 1278.8 and is heading to 1280 handle.

Germany, France and Italy issued joint "regret" statement

German Chancellor Angela Merkel described US President Donald Trump’s decision to withdraw from the Paris climate accord as "extremely regrettable" and she also emphasized that she was expressing herself "in very restrained terms". She called for those who believe "the future of our planet is important" to "continue doing down this path so we’re successful for our Mother Earth." Merkel also pointed out that Trump’s decision "can’t and won’t stop all those of us who feel obliged to protect the planet".

French President Emmanuel Macron delivered a three-minute address to Americans in English, streamed live from Elysee Palace. And he offered a refuge to "all scientists, engineers, entrepreneurs, responsible citizens who were disappointed by the decision of the president of the United States" that "they will find in France a second homeland". He called on those people to come and work with the French and pledged that "France will not give up the fight".

Merkel, Macron and Italian Premier Paolo Gentiloni issued a joint statement taking notes "with regret" on Trump’s decision. Together they regarded the accord as "a cornerstone in the cooperation between our countries, for effectively and timely tacking climate change". And they added the course charted by the accord is "irreversible and we firmly believe that the Paris Agreement cannot be renegotiated".

Corbyn accused May of being "subservient" to Trump

In UK, Prime Minister Theresa May "expressed her disappointment" to Trump regarding the decision. A spokesperson of the Downing Street said that "the Prime Minister stressed that the UK remained committed to the Paris Agreement, as she set out recently at the G7." And, "provides the right global framework for protecting the prosperity and security of future generations, while keeping energy affordable and secure for our citizens and businesses."

May’s rival, Labour leader Jeremy Corbyn accused May of being "subservient" to Trump as she remained silent over the withdrawal from the Paris accord. Corbyn called the decision as "reckless and dangerous" and Paris deal "cannot be up for renegotiation". Green Party co-leader Caroline Lucas condemned May as being "slow and timid" on her response and said it was "another sign of her weakness". She said UK should be "leading the way on tackling climate change".

With six days to go before UK’s election on June 9, the Ipsos MORI poll for the Evening standard showed that support for Conservatives was down four point to 45%. Support for Labour went up six points to 50. Latest YouGov polls showed Conservatives at 42% and Labour at 39%.

Elsewhere…

Eurozone PPI rose 0.0% mom, 4.3% yoy in April. UK construction PMI rose sharply to 56 in May. Japan consumer confidence rose to 43.6 in May. Monetary base rose 19.4% yoy in May.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1189; (P) 1.1223 (R1) 1.1244; More….

EUR/USD’s rally resumed by taking out 1.1267 and reaches as high as 1.1282 so far. Intraday bias is back on the upside with focus on 1.1298 key resistance. Decisive break there will carry larger bullish implication and target 1.1615 resistance next. Near term outlook will now remain bullish as long as 1.1109 support holds. Nonetheless, we’d stay cautious on rejection from 1.1245/98 (138.2% projection of 1.0339 to 1.0828 from 1.0569 at 1.1245) resistance zone. Break of 1.1109 will indicate short term topping and turn bias back to the downside.

In the bigger picture, the case for medium term reversal continues to build up with EUR/USD staying far above 55 week EMA (now at 1.0888). Also, bullish convergence condition is seen in weekly MACD. Focus will now be on 1.1298 key resistance. Rejection from there will maintain medium term bearishness and would extend the whole down trend from 1.6039 (2008 high). However, firm break of 1.1298 will indicate reversal. In such case, further rally would be seen back to 1.2042 support turned resistance next.

Economic Indicators Update