USD/CAD: All Eyes Are Now On Tomorrow's Dual Employment
USD/CAD is pressing into a resistance zone that has capped advances since early April. The pair has been climbing steadily from the 1.3550 lows, but this is the third test of resistance. Tomorrow's dual employment release will determine whether the pair breaks higher or rejects again.
The rate divergence remains the structural driver. The Fed sits at 3.75%, with markets pricing approximately 40% odds of a hike by December. The Bank of Canada is at 2.25%, with the market pricing just 4% odds of a hike at the June 10 meeting. The 150-basis-point differential favors the dollar, and the trajectories are diverging further.
Canada's fundamentals are softening underneath. Q1 GDP contracted 0.1%, following a 1.0% Q4 decline — Canada is now in a technical recession. Higher fuel costs are producing the fastest rise in operating costs in four years. The BoC has signaled patience while the Fed is leaning toward action.
read the full article here.
— Alan
USD/CAD is pressing into a resistance zone that has capped advances since early April. The pair has been climbing steadily from the 1.3550 lows, but this is the third test of resistance. Tomorrow's dual employment release will determine whether the pair breaks higher or rejects again.
The rate divergence remains the structural driver. The Fed sits at 3.75%, with markets pricing approximately 40% odds of a hike by December. The Bank of Canada is at 2.25%, with the market pricing just 4% odds of a hike at the June 10 meeting. The 150-basis-point differential favors the dollar, and the trajectories are diverging further.
Canada's fundamentals are softening underneath. Q1 GDP contracted 0.1%, following a 1.0% Q4 decline — Canada is now in a technical recession. Higher fuel costs are producing the fastest rise in operating costs in four years. The BoC has signaled patience while the Fed is leaning toward action.
read the full article here.
— Alan
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🔔 Closing Bell - Question of the Day
A long lower wick on a candle at a key support level suggests:
A long lower wick on a candle at a key support level suggests:
Anonymous Quiz
87%
Sellers pushed price down but buyers absorbed the selling and drove it back up
9%
Sellers are in complete control — the downtrend will accelerate without exception
2%
Wicks carry no information — only the candle body matters
2%
Long wicks only form during pre-market — they disappear during regular hours
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DXY Analysis: Dollar Breaks Out as NFP Crushes Forecast
DXY breaking out above 99.50 after May NFP came in nearly double the consensus. The breakout from the resistance zone that has capped advances since March is now confirmed, with the next structural target at the 100.50 zone where price topped in late March and April.
The data this week leaves no ambiguity. ISM Manufacturing and Services both beat expectations. ADP and JOLTs came in hot. Consumer confidence beat. CPI at 3.8%, PPI at 6.0%, and the 2-year yield continues to rise — all bullish signals across the EdgeFinder's growth, inflation, and labor categories.
Rate expectations have shifted materially. December hike probability jumped from 48% to 63% on the NFP print.
For the dollar, this is the macro environment that supports continuation. Resilient growth, persistent inflation, rising yields, and a hawkish rate trajectory. As long as those conditions hold, the dollar's structural bid remains intact.
read the full article here.
— Alan
DXY breaking out above 99.50 after May NFP came in nearly double the consensus. The breakout from the resistance zone that has capped advances since March is now confirmed, with the next structural target at the 100.50 zone where price topped in late March and April.
The data this week leaves no ambiguity. ISM Manufacturing and Services both beat expectations. ADP and JOLTs came in hot. Consumer confidence beat. CPI at 3.8%, PPI at 6.0%, and the 2-year yield continues to rise — all bullish signals across the EdgeFinder's growth, inflation, and labor categories.
Rate expectations have shifted materially. December hike probability jumped from 48% to 63% on the NFP print.
For the dollar, this is the macro environment that supports continuation. Resilient growth, persistent inflation, rising yields, and a hawkish rate trajectory. As long as those conditions hold, the dollar's structural bid remains intact.
read the full article here.
— Alan
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US 2-Year Yield: The Best Indicator for Fed Policy Moves
The US 2-year yield jumped to 4.14% today after May NFP came in at 172K, more than double the 85K consensus. The 2Y is the single most important rate to watch for one reason: it is the market's forecast of where the Fed funds rate will be in 24 months.
When the 2Y trades above Fed funds, the market is pricing hikes. When it trades below, the market is pricing cuts. Right now, the 2Y at 4.14% sits 39 basis points above the 3.75% Fed funds upper bound. The bond market is telling you the Fed is heading higher.
The 2Y reprices before the Fed acts — typically by 3 to 6 months. It has signaled every Fed pivot since 1990 within a quarter of the actual move. Its 60-day correlation with DXY currently sits near 0.55, which is why dollar strength tracks the 2Y so closely.
Watch the 2Y minus Fed funds spread. As long as it remains positive, the market is pricing tightening, and the dollar's structural bid remains intact.
read the full article here.
— Alan
The US 2-year yield jumped to 4.14% today after May NFP came in at 172K, more than double the 85K consensus. The 2Y is the single most important rate to watch for one reason: it is the market's forecast of where the Fed funds rate will be in 24 months.
When the 2Y trades above Fed funds, the market is pricing hikes. When it trades below, the market is pricing cuts. Right now, the 2Y at 4.14% sits 39 basis points above the 3.75% Fed funds upper bound. The bond market is telling you the Fed is heading higher.
The 2Y reprices before the Fed acts — typically by 3 to 6 months. It has signaled every Fed pivot since 1990 within a quarter of the actual move. Its 60-day correlation with DXY currently sits near 0.55, which is why dollar strength tracks the 2Y so closely.
Watch the 2Y minus Fed funds spread. As long as it remains positive, the market is pricing tightening, and the dollar's structural bid remains intact.
read the full article here.
— Alan
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🔔 Closing Bell - Question of the Day
When the dollar rallies on hot data while equities sell off, what is the bond market most likely doing?
When the dollar rallies on hot data while equities sell off, what is the bond market most likely doing?
Anonymous Quiz
15%
Yields are rising — the market is pricing in stronger growth, which supports equity valuations
38%
Yields are rising — the market is repricing for tighter policy, which pressures equity valuations
30%
Bond prices are rising — the market is pricing in tighter policy, which pressures equity valuations
17%
Bond prices are falling — the market is pricing in weaker growth, which supports the dollar
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