Investors Lock their Gaze on the US NFPs

EQUITIES KEEP GAINING AHEAD OF THE US JOBS REPORT

The US dollar traded lower against all the other G10 currencies on Thursday and during the Asian morning Friday. It lost the most ground versus CAD, SEK, CHF, NOK, and AUD in that order, while it underperformed the least against GBP.

DJIA — TECHNICAL OUTLOOK

The Dow Jones Industrial Average index accelerated to new highs yesterday, while balancing above a newly-established short-term tentative upside line, drawn from the low of May 4th. The price tested the 34578 hurdle, which is now the new high on the cash index. Given the strong upmove, we might see a small correction lower, but if the above-mentioned upside line stays intact, another push higher may be possible.

BOE SAYS THAT QE SLOWDOWN IS NOT A MATERIAL CHANGE

Yesterday, apart from the US initial jobless claims, we also had a BoE monetary policy decision. British policymakers kept interest rates unchanged at 0.10%, but they proceeded with a technical change in which the pace of weekly bond purchases slows down. That said, they reaffirmed that “as measured by the target stock of asset purchases, that stance remains unchanged”, adding that the QE slowdown is not a material change and that they are ready to reverse it if deemed necessary. With regards to their economic projections, they expected the UK GDP to have fallen less than previously expected in Q1, and to recover to pre-pandemic levels over the course of this year. On the inflation front, they said that it may rise above 2% towards the end of the year, but this is likely to be due to transitory effects and thus, the rise may prove to be temporary. Given that, they added that they do not intend to tighten monetary policy until there is evidence of achieving the inflation goal sustainably.

GBP/USD — TECHNICAL OUTLOOK

GBP/USD is currently trading between two of its short-term tentative lines, a downside one taken from the high of April 20th and an upside one drawn from the low of April 12th. Following the recent rebound from that upside line, the pair is now trading close to the downside line. As long as the rate remains between the two lines, we will stay neutral. In order to consider the next short-term directional move, a break through one of the lines would be needed.

AS FOR THE REST OF TODAY’S EVENTS

Besides the US employment report, we also get jobs data for April from Canada as well. The unemployment rate is expected to have risen to 7.8% from 7.5%, while the net change in employment is forecast to show that the economy has lost 187.5k jobs after gaining 303.1k in March. A soft employment report could raise questions over whether the BoC acted correctly and scaled back its bond purchases at the prior gathering and may force the Loonie to correct lower.

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