USD Weakens After The US Employment Report Shocker

May 10 21, 10:00 GMT

The USD weakened against most of its counterparts on Friday after the US employment report for April proved to be a shocker, given that the NFP figure was far lower than expected, while the unemployment rate rose instead of dropping as expected. Overall, we may see the employment data enhancing the view of the Fed that there is still wide uncertainty in the US employment market despite the improvement made from the US economic recovery, strengthening its dovishness overall. US stockmarkets on the other hand, tended to gain given that chances are for the Fed to delay any tapering of its QE program. The Aussie also gained against the USD, yet was also strengthened by the rise of iron ore prices, one of its main export products. On the other hand, CAD gains against the USD tended to remain rather capped given that the oil prices slumped a bit in the past few days. While gold prices continued to rise reaching a new three month high, benefiting for the USD weakness and despite US yields rising. Pound traders are expected keep an eye out for financial releases today, yet also the results of the elections in Scotland could also affect its direction.

Starting with EUR/USD, the currency pair rose on Friday breaking the 1.2100 (S1) resistance line, now turned to support, yet during the Asian session seems to have found considerable resistance at the 1.2175 (R1) resistance line and stabilised during the Asian session today. We tend to maintain a bullish outlook for the pair as long as it remains above the upward trendline incepted since the 6th of May. Please note that the RSI indicator below our 4-hour chart remained just above the reading of 70 and may be implying that the pair is overbought, so a correction lower is possible. Should the bulls maintain control over the pair, we may see EUR/USD breaking the 1.2175 (R1) resistance line and aim for the 1.2275 (R2) resistance level. Should the bears take over, we may see the pair aiming if not breaking the 1.2100 (S1) support line.

Moving now to commodity currency pairs and specifically AUD/USD, the pair rose on Friday, even steeper than other pairs breaking the 0.7785 (S1) resistance line, now turned to support and reached a new 2 ½ month high by testing the 0.7850 (R1) resistance level. We maintain a bullish outlook for the pair as long as it remains above the upward trendline incepted since the 6th of May. Please note that the RSI indicator below our 4-hour chart remained just above the reading of 70 and may be implying that the pair is overbought, so a correction lower is possible. If AUD/USD finds fresh buying orders along its path, we may see the pair breaking the 0.7850 (R1) resistance line and aim for the 0.7905 (R2) resistance level. Should a selling interest be displayed we may see AUD/USD aiming if not breaking the 0.7785 (S1) support line.

Other economic highlights today and the following Asian session:

Today during the European session we get Norway’s CPI rates for April, UK’s Halifax House prices for April, and Eurozone’s bit more forward looking Sentix index for May. No high impact financial releases are expected form the US and Canada in the American session, yet during the Asian session on Tuesday we note the release of China’s inflation measures, while from Japan, we get the All household spending growth rate for March and BoJ is to be releasing the summary of opinions for the 26-27 meeting.

As for the rest of the week:

On Tuesday we get from Germany the ZEW indicators for May while from the UK BoE governor Andrew Bailey is scheduled to speak. On Wednesday, we get Germany’s final HICP for April, UK’s GDP for Q1 and March as well as the manufacturing output growth rate for Q1, France’s final CPI (EU Norm.) for April and the US CPI rates for April. On Thursday, we note Japan’s Current account balance for March, the US weekly initial jobless claims figure, while in Canada BoC Governor Tiff Macklem is scheduled to speak. On Friday, we get the US retail sales growth rate for April, the industrial output growth rate for April and the University of Michigan preliminary consumer sentiment for May.

EUR/USD H4 Chart