Daily Key Points: April’s US employment report in focus today

The USD rose yesterday and seems to have recovered the losses made from the Fed’s interest rate decision on Wednesday while US Stockmarkets dropped rendering their gains as did gold’s price. Today market attention is expected to be on the release of the of the US employment report for April. The unemployment rate is expected to tick down, the Non-Farm Payrolls figure to drop and the average earnings to slow down just a bit. Τhe tick down of the unemployment rate seems to be sending the message that the US employment rate is tight and is even tightening further yet the drop of the NFP figure may imply that the tightening is losing steam. Οn the other hand, the average earnings growth rate seems to remain at rather high levels, despite the slight slowdown and could imply that the demand side of the US economy remains supported.

Overall should the rates and figures meet their respective forecast, we may see the USD getting some support as the picture of a tight employment market allows the Fed to continue with the tightening of its monetary policy. At the same time we also get Canada’s employment data with the picture being similar as the unemployment rate is also expected to tick down while the employment change figure is expected to drop signalling that the tightening of the Canadian employment market may be slowing. Yet overall the picture seems to allow the BoC to maintain its hawkish stance and continue with the tightening of its monetary policy thus the release should the forecasts be realised could provide some support for the CAD. Across the Atlantic the pound tended to weaken yesterday as despite BoE hiking rates by 25 basis points as expected the interest rate decision tended to disappoint pound traders.

Overall the bank’s outlook for the UK economy seems to be worrying with inflationary pressures being on the rise and the bank expecting further acceleration in the coming months while a recession seems to be threatening the UK economy. As for the commodities front we note the rise of oil prices as worries for the supply side of the commodity, seem to persist given also that OPEC decided to proceed with only a modest production hike as reported by Reuters.

The USD Index was on the rise  yesterday testing the 103.85 (R1) resistance line. We tend to maintain a bias for a sideways motion for the pair and for it to change we would require a clear breaking of the 103.85 (R1) resistance line. Please note that the RSI indicator below our 4-hour chart is between the reading of 50 and 70 currently, implying a rather bullish sentiment of the market. Should the bulls actually take charge of the index’s direction we may see it breaking the 103.85 (R1) resistance line and aim for the 104.70 (R2) resistance level. Should the bears take over, we may see the pair reversing course breaking the 102.90 (S1) support line and aim for the 102.10 (S2) level.

USD/CAD  was on the rise yesterday after bouncing on the 1.2720 (S1) support line yesterday. We tend to maintain a bias for a sideways movement between the prementioned support line, which proved its worth twice in the past days and the 1.2915 (R1) resistance line that had capped the pair’s upward action on 2^a. of May. Should the pair find extensive buying orders along its path we may see it breaking the 1.2915 (R1) resistance line and aim for the 1.3030 (R2) level. On the other hand should the market express a selling interest we may see the pair breaking the 1.2720 (S1) support line and aim for the 1.2575 (S2) support level.

Other highlights for today

Today, in the European session we note from the UK the release of the Halifax House Prices for April and Germany’s industrial output for March. In the American session on the monetary front we note the planned speeches of BoE’s Chief Economist Hugh Pill, NY Fed President Williams, Minneapolis Fed President Kashkari, BoE’s MPC member Tenreyro and Atlanta Fed President Bostic. During Monday’s Asian session we highlight the release of China’s trade data for April, which may create volatility for AUD pairs.

USD Index H4 Chart

Support: 102.90 (S1), 102.10 (S2), 101.25 (S3)

Resistance: 103.85 (R1), 104.70 (R2), 105.60 (R3)

USD/CAD H4 Chart

Support: 1.2720 (S1), 1.2575 (S2), 1.2460 (S3)

Resistance: 1.2915 (R1), 1.3030 (R2), 1.3175 (R3)

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