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Friday’s jobs data (April payrolls 734k below forecast) continues to make headlines and is driving markets today. Some are pointing to possible data collection/reporting issues, while others focus on social programs as the reasons for an actual shortage of labor, and others simply hoping it was a 1-month aberration. But whatever the cause of the weaker-than-expected jobs number, it likely means that the Fed will keep interest rates lower for longer which is positive for equities… the Dow Industrial Average and S&P500 marked new all-time highs on Friday.

Prolonging the low interest environment sparked a dollar selloff leading to a 0.79% decline in the U.S. dollar index on Friday, with the dollar ending the week lower against all the major currency pairs. Some of Friday’s biggest declines were -1.41% vs. SEK, -1.09% vs. ZAR, -1.04% vs. NOK, -1.01% vs. MXN, -0.84% vs. EUR, -0.80% vs. AUD, and -0.68% vs. GBP.

Dollar weakness continues today with the dollar index -0.13%, trading just above 90.000 support at 90.117. Today the GBP is leading the gains, +1.18% following election results from the Scottish National Party which lessened the likelihood of a near-term vote on independence.

The Canadian dollar is now in its 6^th weekly gain vs. the U.S. dollar, gaining 3.82% since the week ending April 2^nd and is +0.34% today. Next support comes into play at 1.2000 and trendline support seen near 1.1950.

The surging Aussie dollar is another currency to watch. The most recent weekly AUDUSD close was at 0.7869 on Feb 19^th and a fresh weekly high close could drive AUD momentum gains. The AUD is trading at 0.7872 today.

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U.S. Nonfarm Payrolls for April increased by 266k, well below the 1mio estimate (this was the biggest Nonfarm Payrolls miss in over 20 years). And March payrolls were revised down from 916k to 770k. The Unemployment Rate for April was 6.1%, above the 5.8% estimate, and an increase over the 6.0% March Unemployment Rate.

The disappointing employment reading doesn’t fit with the economic recovery theme and markets responded by selling the dollar. A strong labor market is one of the Fed’s two pillars (along with inflation) needed to qualify as a genuine recovery. Today’s payroll figures will prolong any action from the Fed on rate adjustments (and delaying the much-discussed ‘tapering’). With rates going nowhere there is no immediate need to hold dollars, leading to today’s weaker dollar.

The U.S dollar index is off today’s lows but is still -0.40%. Support at the April 29 low of 90.420 prevented further dollar declines.

The EURUSD jumped 0.69% following the payroll numbers; GBPUSD +0.50%, AUDUSD +0.82%, USDCAD -0.32%, USDMXN -0.62%, USDJPY -0.81%.

Gold is +1.20% today and higher by 2.8% over two days. And the benchmark 10-Year U.S. Treasury is lower by 3 basis points.

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The U.S. dollar index is higher vs. all its G10 counterparties today, gaining 0.35% and confirming Friday’s surge of 0.73%. Friday’s close above 91.000 broke the dollar out if its 1-month downtrend and could lift the index to 91.500 before significant resistance.

The dollar’s widest gain today is vs. the NZD which weakened after data revealed an unwelcome increase in home price inflation, potentially pressuring the central bank to reconsider existing stimulus. The AUD is also lower vs. the USD despite the RBA (central bank) upgrading its economic outlook in its policy decision overnight.

Other gains for the dollar today: +0.51% vs. MXN, +0.45% vs. GBP, +0.34% vs. EUR, +0.29% vs. CAD, and +0.21% vs. CHF.

This week’s economic releases: today’s Factory Orders and Durable Goods; MBA Mortgage Applications and ADP Employment Change on Wednesday; and Change in Nonfarm Payrolls on Friday.

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In yesterday’s FOMC statement the Fed remained focused on the continuing economic impact of COVID-19. Although noting that progress had been made on vaccine distribution, expanding economic activity, and stronger employment, the Fed’s attention is on remaining weakness. The Fed also noted higher inflation but discounted it as ‘transitory’.

The dollar declined immediately following the FOMC statement, reflecting the Fed’s glass-is-half-empty view on the U.S. economic outlook.

The U.S. dollar reached a new multi-year low vs. the Canadian dollar yesterday, declining 0.69% to close at 1.2312 (the lowest close since February of 2018). Next support for USDCAD is at 1.2250 and major support is at 1.2050. USDMXN declined 0.71% to 19.8500, approaching recent support at 19.8000.

The dollar is moderately higher today on profit-taking as dollar bears lock in gains for the week. The USDMXN is trading above 20.0000 but is limited to trendline resistance at 20.1500. Other gains for the dollar are +0.46% vs. SEK, +0.40% vs. JPY, NZD, & AUD, and +0.36% vs. NOK.

Weekly Jobless Claims for the week ending April 24^th were released today 553k, in line with the 540k estimate. GDP for Q1 (annualized) was released at 6.4% vs. the 6.7% estimate.

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The dollar has regained some footing today after yesterday’s drop enticed some dollar bulls off the sidelines. The U.S. dollar index dropped to the lowest level since early March, to trade as low as 90.682. Trading ranges will likely narrow in conjunction with the start of the FOMC’s 2-day meeting and tomorrow’s policy rate announcement. While no rate change is expected from the FOMC, the policy statement will likely address recent economic outperformance.

Today’s widest dollar gains are +0.36% vs. NZD (-0.51% yesterday), +0.35% vs. AUD (-0.79% yesterday), +0.28% vs. JPY, and +0.21% vs. SEK.

USD/CAD traded to a multi-week low yesterday at 1.2379 and closed at the lowest daily rate since January of 2018. The Canadian dollar is slightly weaker today (-0.10%) but has managed to hold onto the bulk of yesterday’s 0.63% gains vs. the USD.

The latest Housing Price Index was released today at +0.9% for February, in line with the 1.0% forecast.

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The dollar is lower overnight as markets absorbed the news of proposed capital gains tax increases by the Biden administration. The tax proposal would take the top tier rate from 23.8% to 43.4%.

The U.S dollar index is -0.39% at 90.981, below 100-day moving average at 91.037. The dollar index is -0.61% this week and -2.18% over three weeks.

The dollar is lower against all the G10 peers with the widest loss today vs. -0.43% vs. the EUR (-0.70% for the week). The dollar’s biggest decline this week is vs. the JPY at -1.01% where the USDJPY reached a low of 107.477 earlier in NY. The USDJPY is in its 3^rd consecutive weekly decline, dropping from 110.71 on April 2^nd.

USDMXN traded in a sideways range this week, stabilizing between 19.8000 and 20.0000. The dollar has posted six weekly consecutive weekly declines vs. the peso is on track for its 7^th weekly decline, currently -0.27% this week.

U.S Treasuries remained stable this week with the 10-Year yields at 1.566% compared to last Friday’s close at 1.582%. The 10-Year Yield is forecast to close the year above 2%.

The Canadian dollar is up only 0.04% for the week, but that obscures this week’s volatility when the USDCAD traded in a 1.2652-1.2455 range (1.56%) on Wednesday following the Bank of Canada’s rate announcement.

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The dollar rebounded from yesterday’s seven-week low to close with a gain of 0.19%, above support at the 100-day moving average. The dollar’s momentum has carried over into trading today where the U.S. dollar index is +0.18%. Resistance is nearby at 91.555 (55-day moving average).

Today’s dollar gains are +0.25% vs. CHF, +0.14% vs. EUR & DKK, and +0.06% vs JPY.

One exception to today’s trend is vs. the CAD which has surged 0.99% against the U.S. dollar. The Bank of Canada announced its latest rate policy decision earlier today and caught the market off guard with its clearly improved global and regional economic outlooks. Advances in Covid-19 vaccinations, the U.S economic rebound, higher oil process, and strong international demand have boosted Canada’s GDP estimate for this year to 6.75%. Short-term resistance for the USDCAD is at 1.2650 and support at 1.2475. Key support is lower at 1.2350.

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The dollar is under renewed selling pressure today on several fronts. The U.S. dollar index crossed below 55-day moving average support (91.552) early in today’s session, and once that happened quickly dropped to next support at the 100-day moving average (91.030) and is currently -0.43%. Dollar declines should slow from here as the index approaches a 91.000/90.000 weekly congestion area.

Reports of the UK reaching new Covid-19 vaccine milestones has propelled the GBP to the widest gain vs. the USD among the G10 currencies. The GBPUSD is +1.05% today to 1.3975 and is approaching weekly resistance at 1.4025.

The safe-haven CHF and JPY are higher on increased tensions between the U.S./Russia and the U.S./ China.

Major gains vs. the dollar today:

GBP +1.05%

NOK +0.74%

JPY +0.61%

CHF +0.56%

NZD +0.55%

MXN +0.48%

SEK +0.48%

AUD +0.43%

EUR +0.39%

DKK +0.38%

USD/MXN is in its 7^th weekly decline with next support coming into view at 19.5000. Trendline support is seen at 19.2500 and key support lower at 18.7500.

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Nearly all the U.S. major economic releases this week exceeded survey estimates, including today’s Housing Starts for March at 1739k (1613k estimate). Recapping the week’s highlights: CPI +0.6% (+0.5% est.); Import Prices +1.2% (+0.9% est.); Empire Manufacturing +26.3 (+20.0 est.); Initial Jobless Claims 576k (700k est.); Retail Sales +9.8% (+5.8% est.); and Philadelphia Fed Outlook 50.2 (41.5 est.). The one disappointment was yesterday’s Industrial Production, reported 1.4% vs. the 2.5% est. The Fed is certainly paying attention to signs of higher inflation and improving labor market.

The U.S. dollar index is -0.15% today and -0.66% for the week. Near-term support is at 91.500. Currencies are little changed overnight with the balance tipped towards dollar weakness: CHF +0.33%, CAD +0.24%, SEK +0.18%, EUR +0.14%. Dollar gains are +0.25% vs. NZD and +0.18% vs. AUD.

Treasury yields are set to close lower for the week. The benchmark 10-Year Treasury yield is currently 1.584%, down from 1.660% a week ago and -17.8 basis points from the March high.

USD/MXN: The peso is in its 6^th consecutive week of gains vs. the USD. Now that the USD/MXN has broken below 20.0500 and 20.0000, next support is seen in the range of 19.7500-19. Support at 20.0500 failed after holding for 5 days. Positive economic data for the U.S. has reignited risk appetite, lifting emerging market currencies and equities.