FOREX: Tale of Two Halves as Greenback Recovers Following US Data
- Initially on Monday, the US dollar traded weaker against all others in G10, as traders were happy to erode a portion of the post-NFP advance and resume the underlying trend of greenback selling. However, firmer-than-expected ISM services data assisted a solid rebound, with dollar indices now only trading in moderately negative territory as we approach the APAC crossover.
- US ISM Services Index data rose to the highest level since January 2023, and the higher-than-expected prices paid component (65.1 vs. 61.4 est.) has provided further impetus for the greenback recovery.
- This has helped the likes of EUR and GBP to edge back towards unchanged on the session, the clear underperformers in G10. For EURUSD, this translates to the pair reversing around 65 pips from session highs to trade back at 1.13. Initial key support to watch is the 20-day EMA, at 1.1264.
- A similar move for GBPUSD has seen spot narrow the gap to overnight lows of 1.3257. A bearish tweezer top formation on the daily candle chart last Monday/Tuesday highlights a short-term top. Support to watch lies at 1.3225, the 20-day EMA. A break of this level would signal scope for a deeper retracement.
- AUD remains among the best performers after an extended period of consolidation, AUDUSD is gaining following the surprisingly strong showing for Anthony Albanese in the weekend's general elections. The price action puts the rate above the 200-dma and a close above would be the first since November last year.
- Despite the dollar rebound, USDJPY remains 0.6% lower on the session at 144.10, with technical resistance levels remaining intact for now. Moving average studies remain in a bear-mode position highlighting a dominant downtrend. Lower-than-forecast inflation data in Switzerland did little to knock the ongoing optimism for the Swiss Franc. Key USDCHF resistance remain intact at 0.8333, the 2023 low and breakdown point.
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AUSSIE 10-YEAR TECHS: (M5) Strong S/T Bounce
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.915 - High Apr 4
- PRICE: 95.860 @ 16:42 GMT Apr 04
- SUP 1: 95.420/95.300 - Low Feb 13 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.640 - 1.0% 10-dma envelope
Aussie 10-yr futures extended a recent strong bounce through to the Friday close, putting prices through the top end of the recent range. The confirmed breach of 95.851, the Dec 11 high on the continuation contract, reinstates a bull cycle and focuses attention on resistance at 96.207, a Fibonacci retracement point. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
USDCAD TECHS: Bearish Structure
- RES 4: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- RES 3: 1.4415 High Apr 1
- RES 2: 1.4308 50-day EMA
- RES 1: 1.4242 High Apr 4
- PRICE: 1.4196 @ 17:10 BST Apr 4
- SUP 1: 1.4028 Low Apr 3
- SUP 2: 1.3986 Low Dec 2 ‘24
- SUP 3: 1.3944 61.8% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 4: 1.3894 Low Nov 11 ‘24
USDCAD rallied Friday, but remains lower on the week after Thursday’s downleg. The move down has confirmed a clear reversal of the bull cycle between Sep 25 ‘24 and Feb 3. Price is through a key support at 1.4151, the Feb 14 low. This signals scope for an extension towards 1.3944, a Fibonacci retracement. On the upside, key short-term resistance is seen at 1.4308, the 50-day EMA.
CANADA DATA: Unexpected Jobs Contraction Boosts Implied April BOC Cut Chances
Canadian employment unexpectedly contracted in March, falling by the most since January 2022 at -32.6k (+10.0k expected, +1.1k prior) in a sign that the trade war with the US is spilling over increasingly into the "hard" data. The unemployment rate ticked up 0.1pp to 6.7%, in line with expectations and below the November 6.9% high, though unrounded it rose from 6.55% to 6.71% - the largest increase since November.
- The drop in employment was largely due to a 62.0k drop in full-time positions (after -19.7k, the 2nd straight drop), with part-time up for the 4th consecutive month at 29.5k (after 20.8k prior) - that mix is clearly indicative of hiring uncertainty among firms.
- The monthly full-time drop was the 2nd largest since the pandemic lows in the labour market (April 2020). Goods producing jobs fell by 12k (2nd consecutive decline), while services shed 21k (wholesale/retail trade and Information, culture and recreation led losses).
- The participation rate dipped 0.1pp to 65.2%.
- Wages were soft, dropping 0.2% M/M for the first drop since November, with the Y/Y rate slipping to 3.6% from 3.8% prior. The rise in permanent employees' wages of 3.5% Y/Y was well below the 4.1% expected (4.0% prior).
- Market-implied probability of an April BOC rate cut rose to as high as 68% after the data before settling the day at around 55%. That compares to 40% prior to Wednesday's US tariffs announcement.
