FOREX: Trump’s Big Imminent Announcement Unable to Curtail USD Weakness
- US yields have moved lower on Tuesday, which alongside some downward pressure on equity benchmarks, have enabled the underlying trend of a weakening dollar to prevail through the session. Having respected its 20-day exponential moving average well, the USD index is now back below 99.50, highlighting that the recent move above 100 in early May appears to be technically corrective.
- This dynamic sees the Japanese Yen as the best performer, with USDJPY comfortably back below the 143.00 mark, having entirely eroded the post-BOJ upswing from last week. Even the late rhetoric from President Trump suggesting there will be a “very big” positive announcement in the coming days was quickly brushed aside. The trend direction in USDJPY remains bearish and gains since Apr 22 are considered corrective. This refocuses short-term attention on initial support at 141.97, the Apr 29 low.
- Divergence between the low yielders is also notable today, as CHFJPY weakens around 0.85%. 176.00 has provided an important pivot point this year for that cross, and this week’s selloff bolsters the short-term significance of that resistance level. Moves have been underpinned by a more concerned tone regarding Swiss Franc strength from SNB President Schlegel, potentially highlighting that the risk reward for further Franc gains may be diminishing at this juncture.
- Elsewhere, gains for G10 currencies have largely mirrored the adjustment for the DXY, with the likes of EUR, GBP, AUD, NZD and CAD all rising around half a percent.
- Notably, USDCAD printed fresh cycle lows as President Trump made comments on the USMCA being still very effective and potentially not needing to be renegotiated. A dominant downtrend is in place for USDCAD, signalling scope for a move towards 1.3643, the Oct 9 ’24 low.
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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.
