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The US employment report in March turned out to be noticeably worse than forecasts, which, however, had little impact on markets that were completely prepared for such disastrous data, since they already had information about the explosive growth in unemployment applications in the second half of March.
701 thousand jobs were lost, the unemployment rate increased from 3.5% to 4.4%, participation in the labor force decreased from 63.4% to 62.7%, and only wages increased slightly, which is a reaction to the pumping of markets with liquidity and indirectly indicates that the decrease in jobs was most likely caused by the hiring of new workers, rather than mass layoffs.
As the United States is confidently becoming the world leader in the number of cases of COVID-19, and the pace of economic slowdown is accelerating, we should expect that the failed employment report for March is only the first stage of the apocalypse, and the next report will be much worse.
The CFTC report reflected weak changes in investors' positions in major currencies. OIt is possible to reduce a short position at a CSD and a reduction in long in JPY, which indicates the stabilization of the currency market and the gaps made in the first weeks of the panic.
At the same time, the long position in the euro has increased again, which remains the leader of speculative demand in the medium-term, while on the contrary, there is an increase in the short position of the dollar. These changes indicate a fairly stable bearish sentiment on the dollar, which is still not falling due to increased demand due to the need to service a huge debt mass.
Moreover, bearish pressure on the dollar is increasing. It may decrease this week, primarily against the euro and the franc, which may be supported by updating information on slowing the spread of coronavirus in Europe.
USD/CAD
The reduction in the bearish position on the CFTC reports and the strong growth of oil limited the growth of USD/CAD, the estimated fair price is not far from the current level, the trend is down, which indicates an increased probability of a decrease in the pair over the next few days.
The employment report in Canada will be released a week behind the US, so there is no data on how many jobs the Canadian economy lost in March. At the same time, it should be noted that the number of unemployment claims in the US over the past 2 weeks has increased by 10 million, while in Canada, the growth was about 2 million during this time, which is proportionally even higher than in the United States. This means that the employment report, which will be published on Thursday April 9, will most likely be worse than expected and put pressure on the loonies.
Technically, USD/CAD forms a classic "flag" pattern; trading is in a narrowing range. A strong impulse for the Canadian currency is not expected until Thursday, but a weak employment report will increase the chances of getting out of the range and consolidating above resistance 1.4348. Support is at 1.4070 / 90, which is the most logical range trading until Thursday.
USD/JPY
Despite the fact that the combined long position of the JPY declined by 0.68 billion, it is still in favor of the yen. Other factors, such as increased demand for bonds and gold, indicate that the current stabilization in the currency market is temporary. The estimated fair price of USD/JPY is significantly lower than the current level, and the probability of the pair falling to the 104 level remains.
Mizuho Bank notes that the current indicators of the Japanese economy suggests a significant deterioration in the coming weeks. The dynamics of demand in the bond market leads to this conclusion, and studies on inflationary expectations indicate that consumer prices are slowing down, and deflation is preparing to cover the Japanese economy once again.
These trends strengthen the yen, which is reflected in the dynamics of the estimated fair price and the position of speculators. Now, short-term growth of USD/JPY will end below the resistance zone at 111.40 / 70, the nearest target is 109.39, where the formation of a local top and a downward movement is possible to the support zone at 106.90.
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