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USD Index Extends Pullback Ahead Of US Employment Data

FOREX
  • Despite some initial strength during APAC hours on Thursday, the greenback has steadily edged lower, extending on the prior day’s move that was kickstarted by relatively dovish remarks from Fed officials who appear open to pausing rate hikes in June.
  • The USD weakness has persisted through the London close, and the Bloomberg USD Index sits close to session lows, having pulled back around 1% from Wednesday’s cycle high. The move was initially triggered by the markdown in Unit Labour Costs with price action gaining momentum following the ISM prices paid registering at 44.2 versus a 52.3 estimate.
  • The move has favoured high beta currencies in G10 with a further tailwind provided by the boost to the commodity complex. This has tipped AUD/USD through to the week's best levels, rising 1.15% on the day, closely followed by the likes of CAD and GBP.
  • GBPUSD’s short-term rally has extended, and this week’s recovery has resulted in a move above the 20- and 50-day EMAs. The break provided strong impetus for a continuation higher, significantly narrowing the gap to 1.2547, the May 16 high. Above here, attention will turn back to 1.2680, the May 10 high and the bull trigger.
  • USDCAD also sharply extended the reversal from the May 26 high of 1.3655. Today’s 1.3437 low, as of writing, places the pair in close proximity to the next support to watch at 1.3404, the May 16 low. A break of this level would highlight a stronger reversal.
  • All focus on tomorrow’s NFP release where Bloomberg consensus looks for further moderation in payrolls growth in May to +195k versus a prior read of +253k.
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