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Check out the brand new DailyFX trading forecasts for Q3

MARKET DEVELOPMENT – USD BID ON NFP, GBP BOOSTED BY BARNIER

USD: The USD received a bid on the latest NFP report. Although the importance of the report has diminished somewhat given the that the market has priced in Fed tightening, eyes were on the wage component, which has been the focus in recent times. Today’s report showed a monthly rise of 0.4%, taking the annual rate to 2.9%. Consequently, the USD rose to session highs, while the beat on the headline also added to the bid. However, markets will want to see how consistent the wage growth is over the next few NFP releases.

CAD: Overnight, hawkish commentary from BoC Deputy Governor Wilkins kept the Loonie firm for much of the morning, with Wilkins stating that the BoC had debated whether to remove the “gradual approach” guidance to raising rates. As such, signalling a more aggressive BoC hiking path eyes October for the next rate hike. However, a weak Canadian jobs report, coupled with the strong NFP release saw CAD pare its gains. Canadian employment change fell by 51.6k, missing expectations, although the drop was led by part-time workers (-92k), the unemployment rate saw a surprise uptick to 6%, despite the drop in participation rate.

GBP: The Pound outperforms against its counterparts amid a raft of positive Brexit commentary from EU Chief Negotiator Barnier, who stated that the EU are open to discussing other backstops for the Irish border, adding that they are ready to simplify checks. The reaction to these comments from Barnier emphasise that GBP is attractive on dips with the Pound more reactive to positive news, given that the markets have priced in bearish news.

DailyFX Economic Calendar: Friday September 7, 2018 – North American Releases

GBP Bid on Brexit Boost, Wage Uptick Lifts USD - US Market Open

DailyFX Webinar Calendar: Friday, September 7, 2018

GBP Bid on Brexit Boost, Wage Uptick Lifts USD - US Market Open

IG Client Sentiment Index: USDCAD Chart of the Day

GBP Bid on Brexit Boost, Wage Uptick Lifts USD - US Market Open

USDCAD: Data shows 35.8% of traders are net-long with the ratio of traders short to long at 1.79 to 1. In fact, traders have remained net-short since Aug 30 when USDCAD traded near 1.30403; price has moved 0.7% higher since then. The number of traders net-long is 14.3% lower than yesterday and 18.7% lower from last week, while the number of traders net-short is 18.5% lower than yesterday and 3.9% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USDCAD prices may continue to rise. Positioning is less net-short than yesterday but more net-short from last week. The combination of current sentiment and recent changes gives us a further mixed USDCAD trading bias.

Five Things Traders are Reading

  1. US Dollar Jumps after All-Around Solid August US Nonfarm Payrolls Reportby Christopher Vecchio, CFA, Sr. Currency Strategist
  2. GBP Soars on Brexit Boost by EU’s Barnier" by Justin McQueen, Market Analyst
  3. Charts for Next Week – DXY, EUR/USD, GBP/CAD, DAX, Gold Price & Moreby Paul Robinson, Market Analyst
  4. EURUSD Upside Remains Limited Unless US Jobs Report Disappoints” by Nick Cawley, Market Analyst
  5. Nasdaq 100, FAANG Charts and What They Could Mean for the Whole Market” Paul Robinson, Market Analyst

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX