Dollar rally derailed

Traders were eagerly buying greenbacks following the robust ADP report on Wednesday, and NFP forecasts were revised higher. Fed Chair Jerome Powell’s somewhat hawkish tone in his press conference, later that day, fuelled renewed demand. 

The headline NFP result crushed the forecasts when 263,000 new jobs were added in April. The immediate reaction to buy dollars proved to be a mistake. The details were a tad soft, and the dollar gains disappeared as fast as they occurred.

The US dollar is higher against the G10 major currencies since the New York open after the employment report underscored the health of the US economy. However, the well-defined FX trading ranges are still intact, and the USDX has retreated well-before testing key resistance at 98.05.

GBPUSD surged from 1.2992 to 1.3042 following the NFP report which suggests that the earlier weakness was mostly pre-employment report positioning with a little help from soft UK data. 

USDCAD bounced off resistance in the 1.3480-90 zone. The weaker than expected ISM Non-manufacturing PMI (actual 55.5 vs forecast 57.0) drove the currency pair below support at 1.3430 and it now targets 1.3370.

Traders will have plenty to digest in the coming week. The Reserve Bank of Australia and Reserve Bank of New Zealand policy meetings could spark fireworks as interest rates cuts are on the table. An upside surprise to Thursday’s UK GDP data would reinforce the Bank of England’s modestly tightening bias and underpin GBPUSD. US inflation data is released Friday. Headline and core CPI are expected to rise 2.1%, y/y. 

Wall Street is trading higher as of 14:00 GMT, led by a 1.0% gain in the Nasdaq as the employment data underscored the health of the economy. Amazon (AMZN: Nasdaq) climbed 2.75% after Warren Buffet said Berkshire Hathaway bought the company’s stock.