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Greenback Reverses Post-NFP Strength, CAD Surges

FOREX
  • Following the release of the US employment data the greenback had a knee-jerk higher. However, notable revisions took the shine off the headline beat for the change in non-farm payrolls and the USD steadily lost favour over the course of the US session.
  • Additionally, better performing US regional banks and a corresponding firming of major equity indices weighed on the USD index, which finds itself sitting 0.2% in the red approaching the close.
  • The uptick for US yields has kept pressure on the Japanese yen, with USDJPY consolidating modest gains on the day, just below the 135 handle. However, there have been strong USD reversals elsewhere in G10 with GBP and AUD notable performers.
  • A very decent climb for cable sees the pair at fresh trend highs, narrowing the gap with the May 2022 highs at 1.2667. The trend outlook in GBPUSD remains bullish and this fresh cycle high reinforces current conditions. Above those highs, attention will shift to 1.2733, the 2.0% 10-dma envelope and 1.2759, a Fibonacci retracement.
  • The best performers on Friday have been the Canadian dollar and the Norwegian Krone, both benefitting from the firmer risk sentiment which translated into a solid 4% recovery for crude futures to end the week.
  • For CAD in particular, an additional tailwind came with the April jobs report. Net change in employment of +41.4k doubled the surveyed median estimate. Despite the balance being toward part-time job creation, a lower unemployment rate and higher hourly wage rates underpinned a substantial 1% rally for the Canadian dollar on Friday. Price action resumes the bear leg that started Apr 28. Note too that price has breached both the 20- and 50-day EMAs and this suggests scope for a deeper retracement. Immediate sights are on 1.3385, the April 19 low.
  • A quiet start to next week with a lack of tier-one data and Monday’s holiday in both the UK and France. Focus swiftly turns to US CPI data on Wednesday and the Bank of England rate decision on Thursday.
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