Non-Farm Payroll Grew Only 98k, USD/CAD Dives but Not a Disaster for Dollar Yet

US non-farm payroll report comes in much weaker than expected. Only 98k jobs were created in March, around half of expectations of 177k only. Prior month’s figure was also revised down from 235k to 219k. Unemployment rate dropped 0.2% to 4.5%, hitting the lowest level in nearly 10 years. Average hourly earnings posted 0.2% mom rise in March, below expectation of 0.3%. Released from Canada, employment rose 19.4k in March versus expectation of 5.7k. Unemployment rate rose to 6.7%. Notable weakness is seen in USD/CAD after the releases, as Canadian dollar is additionally supported by surge in oil price. Some buying is seen in the Japanese yen, on risk aversion and possibly on expectation of fall in treasury yields too. Meanwhile, dollar is so far steady against European majors.

US launched military strike in Syria, Russia Condemned, China Xi Overshadowed

Gold and WTI Crude oil jump today on news that US launched military strike on the airfield in Syria in response to the government’s use of chemical weapons on civilians. Stocks, however, are relatively steady with just mild safe haven flows. Russian President Vladimir Putin condemned the US strike as "act of aggression against a sovereign state". Meanwhile, Putin suspended the 2015 memorandum of understanding on air operation. And, Putin’s spokesman said that the risk on confrontation between US and Russia as "significantly increased". Also, Putin ordered additional measures to strengthen Syria’s air defenses to protect the "most sensitive" infrastructure assets of the country. The development overshadows the meeting between Trump and Chinese President Xi Jinping.

BoE Carney: Brexit negotiations a litmus test for responsible financial globalization

BoE Governor Mark Carney said today that "how Brexit negotiations conclude will be a litmus test for responsible financial globalization." And, the EU and UK are "ideally positioned to create an effective system of deference to each other’s comparable regulatory outcomes, supported by commitments to common minimum standards and open supervisory cooperation." Meanwhile, Carney also said that " level of planning is uneven across firms" regarding Brexit. And, "plans may not be being sufficiently tested against the most adverse potential outcomes – for example, if there is no withdrawal or trade agreement in place when the UK exits from the EU."

Release from UK, industrial production dropped -0.8% rose 2.8% yoy in February, versus expectation of 0.2% mom, 3.7% yoy. Manufacturing production dropped -0.1% mom, rose 3.3% yoy, versus expectation of 0.3% mom, 3.9% yoy. Construction output dropped -1.7% mom in February. Trade deficit widened to GBP -12.5b in February. NIESR GDP estimate rose 0.5% in March.

ECB Praet: Premature to discuss reduction of asset purchases

ECB chief economist Peter Praet said in a TV interview that it’s "premature" to discuss further reduction of asset purchases. He warned earlier this week that "if investors start perceiving that the path of the policy rate is subject to upward uncertainty … long-term interest rates will be pushed higher and asset purchases will become less effective." ECB President Mario Draghi also said that there was no "sufficient evidence to materially alter our assessment of the inflation outlook". Therefore, "reassessment of the current monetary policy stance is not warranted at this stage." And those include "interest rates, asset purchases and forward guidance."

Also released from Europe, German industrial production rose 2.2% mom in February, trade surplus widened to EUR 2.1b in February. Swiss unemployment rate was unchanged at 3.3% in March. Swiss foreign currency reserves rose to CHF 683.0b in March.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.3390; (P) 1.3420; (R1) 1.3442; More….

USD/CAD’s sharp fall and break of 1.3373 minor support suggests that recovery from 1.3263 has completed with three waves up to 1.3455. The corrective structure in turns indicates that decline from 1.3534 is resuming. Intraday bias is turned back to the downside for 1.3263 support and below. Fall from 1.3534 is still viewed as a correction for the moment. Hence, we’d expect strong support from 1.3184 cluster level (61.8% retracement of 1.2968 to 1.3534 at 1.3184, 100% projection of 1.3534 to 1.3263 from 1.3455 at 1.3814 too) to contain downside and bring rebound. On the upside, break of 1.3455 will turn bias back to the upside for 1.3534 resistance.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg from 1.2460 is likely still in progress and could target 61.8% retracement of 1.4689 to 1.2460 at 1.3838. We’d look for reversal signal there to start the third leg. Break of 1.2968 will argue that the third leg has already started and should at least bring at retest of 1.2460 low. However, sustained trading above 1.3838 would pave the way to retest 1.4689 high.

Economic Indicators Update