Canadian Dollar Lower after Employment Miss, But US Dollar Even Worse

Canadian dollar drops broadly as employment data missed market section. While it’s trading as the weakest one for today, the movement in USD/CAD is rather muted. That’s because focus is turning to the greenback again as selling gathers momentum. Weakening treasury yield could be a factor driving the greenback down. But it’s also due to profit taking after long stretched bull run. Elsewhere in the markets, Sterling recovers against all other major currencies as markets realized BoE was not that dovish in yesterday’s announcement at all. For the week, Canadian Dollar is still the strongest one for the time being, followed by the Pound. New Zealand dollar is the weakest for the week, followed by Yen.

Canadian employment market contracted -1.1k in April, much worse than expectation of 20.5k. Unemployment rate was unchanged at 5.8%, in line with consensus. From US, import price index rose 0.3% mom in April, below expectation of 0.50%.

Australian Dollar boosted by surge in Iron Ore futures in China’s DCE

Australian Dollar surged in European session today. Strength in Iron ore price was likely a key factor. Iron Ore futures in China’s Dalian Commodity Exchange soared after lunch and gain 2.76% for the day. In the background, there is some optimism on iron ore and steel price as inventory falls. ANZ noted in a research note that Chinese steel demand continued to beat expectations as “real estate investment and housing starts are picking up, while infrastructure spending remains elevated.” Also, “after some restocking in late March ahead of a key maintenance period, the scene is set for steel mills to re-enter the market.”

BoJ Kuroda: Some steps remaining for government on fiscal reforms

BoJ Governor Haruhiko Kuroda spoke to the parliament today and hailed that the government has made significant progress on fiscal reforms. And, there is “some lag before the steps already taken begin to affect the economy”. But he also emphasized that there are “still some steps remaining that the government needs to take on structural reform and growth strategy.”

New Zealand BusinessNZ PMI rose to 58.9, highest since Jan 2016

New Zealand BusinessNZ Performance of Manufacturing Index rose to 58.9 in April, up from 53.1. That’s also the highest level since January 2016. BusinessNZ’s executive director for manufacturing Catherine Beard noted that “although April represents a good result for the sector, the key will be to continue the expansion momentum over the coming months.”

Also release in Asian session, Australia home loans dropped -2.2% mom in March, Japan M2 rose 3.3% yoy in April.

Looking ahead

Canadian job data will be the main focus for today. US will release import price index and U of Michigan consumer sentiment.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1856; (P) 1.1901 (R1) 1.1960; More….

EUR/USD’s rebound from 1.1822 extends to as high as 1.1958 so far. Intraday bias stays on the upside for 4 hour 55 EMA (now at 1.1963) and above. Nonetheless, such rebound is viewed as a corrective recovery. Therefore, upside should be limited by 38.2% retracement of 1.2413 to 1.1822 at 1.2048 to bring fall resumption. On the downside, below 1.1822 will resume the whole decline from 1.2555 and target 1.1708 medium term fibonacci level next.

In the bigger picture, current decline and firm break of 1.2154 support confirms rejection by 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. A medium term top should be in place at 1.2555 and deeper decline would be seen back to 38.2% retracement of 1.0339 to 1.2555 at 1.1708 first. With current downside acceleration, there is prospect of hitting 61.8% retracement at 1.1186 before completing the decline. But still, we’ll need to look at the structure before deciding if it’s a corrective or impulsive move.

Economic Indicators Update