FOREX: USD Bounces Back, US Data & Firmer Equities Provide Additional Tailwinds
- The USD underwent a mild corrective bounce early Tuesday, reversing a small part of the Monday underperformance as catalysts for a further phase of USD weakness dried up somewhat. Firmer US data and a constructive tone for major equity benchmarks then provided additional tailwinds for the greenback, leaving the USD index roughly 0.5% higher as we approach the APAC crossover.
- US JOLTS job openings came in above expectations, and despite the data potentially providing a stale view of the US labour market, the data spurred a more protracted intra-day recovery for the dollar. This prompted the likes of USDJPY(+0.88%) to extend its bounce to over 1% from session lows, and close back in on the 144 handle. In similar vein, USDCHF has rallied back to 0.8240 up 0.77% on the session. While the Swiss CPI data was in line with expectations, it did confirm that annual inflation slipped below the central bank’s target range at -0.1% Y/y.
- The Euro has traded on the backfoot as below expectation Eurozone inflation data may also be weighing on the single currency ahead of this week’s ECB meeting. The ECB’s June macroeconomic projections will be key in shaping the initial market reaction to Thursday’s policy statement, given a 25bp rate reduction is unanimously expected.
- EURUSD has spent the US session consolidating back below the 1.14 mark. In terms of support, the 20-day EMA provides short-term significance on a closing basis and currently intersects at 1.1316.
- After being among the best performing currencies on Monday, the likes of AUD and NZD have given up a solid portion of those advances today, as the relief rally for the greenback extends, and weighs on antipodean FX. For AUDUSD, that’s another test/rejection of the 0.6500 handle, a level spot has been unable to close above this year despite several tests of the psychological mark.
- Australian GDP highlights Wednesday’s APAC calendar, before the Bank of Canada decision later in the session. US ADP and ISM Services PMI are other notable data points.
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USDCAD TECHS: Hits Bear Trigger, New Cycle Low
- RES 4: 1.4415 High Apr 1
- RES 3: 1.4296 High Apr 7
- RES 2: 1.4087 50-day EMA
- RES 1: 1.3906/3935 High Apr 17 / 20-day EMA
- PRICE: 1.3793 @ 17:00 BST May 2
- SUP 1: 1.3760 Low Apr 21 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
The trend set-up in USDCAD deteriorated further Friday, with prices slipping through the bear trigger to narrow the gap with next support. The fresh cycle low reinforces the bear cycle and signals scope for a continuation near-term. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Moving average studies are in a bear mode position, highlighting a dominant downtrend. First resistance to watch is 1.3943, the 20-day EMA.
AUDUSD TECHS: Consolidation Phase
- RES 4: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6528 High Nov 29 ‘24
- RES 2: 0.6471 High Dec 9 ‘24
- RES 1: 0.6470 High May 2
- PRICE: 0.6445 @ 16:59 BST May 2
- SUP 1: 0.6344/6316 Low Apr 24 / 50-day EMA
- SUP 2: 0.6181 Low Apr 11
- SUP 3: 0.6116 Low Apr 10
- SUP 4: 0.5915 Low Apr 9 and key support
AUDUSD remains inside a consolidation phase, having traded either side of the 0.6400 level for 10 consecutive sessions. The underlying trend remains bullish and the pair is trading close to recent highs. Price has recently breached a key resistance at 0.6409, the Dec 9 ‘24 high. This breach reinforces bullish conditions and signals scope for a continuation higher near-term. Sights are on 0.6471 next, the Dec 9 2024 high. Initial key support to monitor is 0.6316, the 50-day EMA. A clear break of this EMA would be a concern for bulls.
US TSYS: Rates Retreat, Sentiment Improved Though Trade Risk Remains
- Treasuries look to finish near late Friday session lows after trading firmer on the open, higher than expected Nonfarm payrolls at 177k (sa, cons 138k) of which private contributed 167k (sa, cons 125k) triggered the early reversal.
- However, two-month revisions of -58k offset the 39k beat for nonfarm payrolls, with a similar story for private (a 42k surprise vs -48k two-month revision).
- Stocks are back near four week highs - pre-"Liberation Day" levels as hopes of some trade deal being made improved sentiment.
- The Wall Street Journal reports that "Beijing is considering ways to address the Trump administration’s gripes over China’s role in the fentanyl trade... potentially offering an off-ramp from hostilities to allow for trade talks to start." The Journal notes that "discussions remain fluid" and China "would like to see some softening of stance from President Trump".
- Currently, the Jun'25 10Y contract trades -20 at 111-07.5 vs 111-02 low -- initial technical support (50-dma) followed by 110-16.5/109-08 (Low Apr 22 / 11 and the bear trigger). Curves bear flattened, 2s10s -3.480 at 48.002, 5s30s -4.911 at 86.807.
