The Canadian dollar has posted small gains, trading just below the symbolic 1.25 line in the European session. We could see stronger movement from the currency when US nonfarm payrolls are released later today. The month of March has brought plenty of turbulence to the financial markets, highlighted by the Ukraine-Russia war, which shows no signs of ending anytime soon. The war has caused a massive humanitarian crisis and ruptured relations between Moscow and the West, and clearly, such a grim landscape has taken its toll on investor risk appetite. The Canadian dollar is sensitive to risk, but gained ground in March, as USD/CAD fell by 1.28%. The currency has managed to remain in demand despite heightened risk apprehension, thanks to the Canadian economy, which is a major exporter of oil and other commodities. The ongoing surge in commodity prices has boosted the Canadian economy as well as the Canadian dollar, which earlier this week hit its highest level since November 2021. Canada’s economy rose by a modest 0.2% in January. GDP has now expanded for the eighth month in a row, but the recovery has been hampered by the Covid pandemic. Some parts of the country are experiencing a spike in Omicron cases, which appears to be a sixth wave of Covid. If the government responds by tightening health restrictions, the move will likely dampen economic activity. US Nonfarm Payrolls could affect Fed policy  All eyes are on US nonfarm payrolls, with a consensus estimate of 490 thousand jobs. There is growing talk that the Federal Reserve could resort to salvos of 50 basis points in order to contain hot inflation, and today’s release could have a significant impact on the size of upcoming rate hikes – a print of 600K or higher will bolster the arguments for that the economy is strong enough to withstand a series of 50-base point hikes. USD/CAD technical USD/CAD faces resistance at 1.2588 and 1.2699. There is support at 1.2416 and 1.2355.

Yields on Eurozone government bonds continued to rise this week. This continued a sell-off that began at the beginning of March, triggered by the war in Ukraine. Immediately after the outbreak of war, safe government bonds were still in demand. This turned around relatively quickly, however, as the market shifted its focus to the additional inflationary pressures as a result of the war. Rising commodity prices are the most obvious economic impact of the war, but this could be compounded by additional price pressures from supply shortages, such as the COVID-19 pandemic triggering a shortage of semiconductors, which in turn led to rising vehicle prices. The war will thus both directly increase inflation rates and increase future risks. At the same time, these factors also pose significant risks to the economy. The sharp rise in energy prices is putting a strain on household purchasing power. The economic viability of companies with high energy consumption has been called into question. Supply shortages could lead to production cutbacks or stops. The demand for certain goods and services that have a high share of raw materials could suffer. So, the risks of economic damage are also considerable. We see two reasons why the market is nevertheless focusing on inflation. One is that the impact on inflation is already clear, such as the massive jump of the inflation rate in the Eurozone in March. The other is that the ECB and - even more so - the US Fed are more concerned about inflation. Unlike the US Fed, the ECB is moving very slowly, but the recent decision to taper securities purchases more quickly and possibly end them in 3Q was a step away from the current ultra-loose monetary policy, despite the war. We believe that risks to the economy are currently not properly priced into benchmark German Bunds. Due to the above-mentioned factors and the rise in medium- and long-term interest rates, weaker economic data seems likely during the coming months. This should trigger a countermovement after the sharp rise in yields and lead to a decline in yields for medium and longer maturities. At the upcoming meeting of the ECB Governing Council in mid-April, a verbal dampener for yields could also come from this side. Yields of short-term maturities, on the other hand, should continue to rise, as we expect interest rate hikes in the Eurozone to start in December, but later than the market is currently pricing in. In the US, yields have also risen massively in recent weeks. In contrast to the Eurozone, however, yields on short maturities have risen significantly more than those on medium and longer maturities. As a result, there is virtually no yield difference any longer between the 2-year and 10-year maturity. The market is thus pricing in the peak of the economic and interest rate cycle. The US market thus seems to be better prepared for somewhat weaker economic data. We therefore expect a sideways movement for medium and longer maturities over our forecast horizon. Yields on short maturities should still rise somewhat, but less than the market is currently pricing in. In our view, it is questionable whether US key interest rates will continue to rise in 2023. Download The Full Week Ahead

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As traders reacted to today's US labor market data, the greenback traded broadly higher on Friday. At the time of writing, the EURUSD pair was seen at around 1.1050. According to a recent report, the US economy added 431,000 jobs in March, below the 490,000 expected. However, the February number was revised upward to 750,000 from 678,000. At the same time, the unemployment rate improved to 3.6%, down from 3.8% previously. Finally, the yearly wage growth improved to 5.6% (against 5.5% expected), while the monthly change met estimates at 0.4%. After the data, the CME Group FedWatch Tool showed a 72.5% probability of a 50 bps hike in May, compared to 71% earlier in the day. The support is seen at the 1.10 level, and if not held, the pair might decline toward 1.0950. Alternatively, the resistance remains at the key 1.12 level. If the euro jumps above it, the medium-term outlook could change to bullish.

Summary Although slower than in recent months, the 431K increase in employment in March gives a clearer picture of what remains a solid trend in hiring. The strong pace of hiring is being supported by rising labor force participation but is still plenty strong enough to keep the labor market tightening. The unemployment rate fell to a fresh cycle low of 3.6%, while average hourly earnings growth picked up to 0.4%. While the jobs market is not the Fed'snumber one priority at present, today's solid report supports the prospect of a 50 bp increase in the fed funds rate at the FOMC's May meeting. And the beat goes on The slowdown in hiring in March leaves nothing to be concerned about on the labor front. Instead, the431K increase in payrolls offers a cleaner read on the trend in hiring after the past few months' reports have been affected by unusual seasonal dynamics and the Omicron COVID wave. Hiring continues along at a robust pace that is still more than twice the average of the past expansion. If the March pace were to be sustained, payrolls would be back to their pre-COVID levels in July of this year. Further improvement on the labor supply front supported the resilient pace of hiring. The labor force participation rate rose another tick in March to a fresh cycle high of 62.4%. We expect this trend to continue as the availability of jobs continues to pull more workers into the labor market and lessfavorable household finances in the face of inflation and dwindling fiscal support also give a push. The rise in the labor force (418K) still did not match the jump in the household measure of employment(736K), driving the unemployment rate lower than expected to 3.6%. Employment gains were broad-based across industries and were led by the still-recovering leisure& hospitality sector. Employment in leisure & hospitality rose 112K in March and is now "only" down8.7% since February 2020. Manufacturing employment rose by 38K, including 22 Knew workers in the stretched durable goods industries. Professional & business services, retail trade and construction also saw rock-solid employment gains in the month. Total nonfarm employment is now 1.6 million jobs, or just 1%, below February 2020 levels. Nearly all of these still missing jobs are in leisure & hospitality, health care or state & local governments. Plenty if not most other sectors have seen total employmentregain or surpass their February 2020 employment levels. Download The Full Economic Insights

Equity markets are nudging higher at the end of the week after suffering losses a day earlier, as the consolidation phase continues. This continues to be a very headline-driven market and they're coming thick and fast. Talks between Ukraine and Russia are progressing well, it seems, but things can change rapidly, for better or worse. Until we see a deal, the situation will continue to feel precariously balanced and investors will remain on edge as a result. Claims of a Ukrainian attack on a fuel depot in Belgorod, where further explosions have recently been reported, may ignite further tensions if proven to be accurate. Not that Russia itself has lowered the intensity of its attacks in Ukraine since the negotiations began, of course. Naturally, the Kremlin won't let hypocrisy stand in the way if it wants to escalate the crisis once more. Interestingly, Ukraine is yet to confirm responsibility for the attacks. Eurozone inflation piles further pressure on ECB Inflation in the eurozone hit another all-time high in March, jumping to 7.5% from 5.9% in February. Energy prices are strongly behind the move which isn't going to change any time soon, although price pressures are becoming a little more widespread. The core reading only rose to 3% though, up from 2.7%, which is still way above the ECB's 2% inflation target. The central bank has continued to swim against the tide when it comes to inflation and despite a major shift at the last meeting, continues to be far less hawkish than the markets. Today's data will make life even harder for the ECB which may start to move more in line with market pricing of 40-50 basis points of hikes by year-end if this continues. Another strong jobs report The US jobs report was once again quite strong, even if the headline NFP fell a little short of expectations. The creation of 431,000 jobs is still extremely good at a time when unemployment is falling to 3.6%, which surpassed expectations. Throw into the mix higher participation which the Fed will no doubt be pleased to see as this is one thing that can alleviate some of those wage pressures and it's hard to find fault with the report. As it is, wages are still rising strongly at 5.6%, somewhat offsetting the inflation drag. Ultimately, this means plenty of rate hikes this year and probably more chance of one or two super-sized, the first of which is now heavily priced in for May. Oil falls below $100 on SPR release Oil prices are continuing to fall today, as we await an announcement from IEA regarding the coordinated SPR release following President Biden's decision this week. Unlike on the previous two occasions, markets have responded favourably to the latest release, which is by far the largest ever from US reserves. The timing nicely coincides with the run-up to the midterms as well which I'm sure is merely a coincidence. Whether it has a significant impact in that time though will ultimately depend on the situation in Ukraine. One thing it will do is increase OPEC+ resistance to boosting output, not that it has shown any ability to even deliver 400,000 barrels per day increases in recent months. Compliance increased to 151% in March, from 136% in February, meaning its new slightly higher targets will simply increase the amount in which it will likely fall short in May. At least the group isn't being political in its decision making... Gold eases lower after strong jobs data Gold is a little lower at the end of the week, with the jobs report weighing a little as the dollar strengthened. It doesn't really change much as far as the yellow metal is concerned as it remains range-bound, comfortably above $1,900 and seemingly going nowhere fast. Traders are happy to hold on but in no rush to buy, it seems. Bitcoin failing to capitalise on Monday's breakout Bitcoin accelerated moves to the downside yesterday and has continued to do so again today as it wipes out all of Monday's breakout gains. It now finds itself back below $45,000, albeit still in a fairly healthy position. The cryptocurrency rallied almost 20% from its 21 March lows but rather than capitalise on its break above $45,500 it appears to have induced some profit-taking. It's slipped almost 10% from Monday's highs so it will be interesting to see if traders are ready to pile back in or if they have no faith in the breakout.

AUDJPY lower as expected to test strong Fibonacci support at 9100/9080. Longs need stops below 9060. A break lower is a sell signal targeting 9000/8990 then support at 9010/8990. Our longs at 9100/9080 target 9145 & resistance at 9190/9200 for profit-taking. Further gains are less likely but should target 9260/65 & perhaps as far as 9300/9320. If we unexpectedly continue higher however look for 9350/55 before a retest of what should be strong resistance at 9400/16. A break above 9430 is a buy signal. Dax finally tests support at 14350/300 for some profit-taking on our shorts with low for the day exactly as predicted - longs could still be risky - if you try, stop below 14200. A break lower is the next sell signal targeting 13950/850. Minor resistance at 14540/580 but above 15610 can target strong resistance at 14750/850. Shorts need stops above 14950. FTSE outlook is more negative now. We could target first support at 7435/25 but longs here are probably risky. Best support at 7365/45. Longs need stops below 7325. Resistance at yesterday's high of 7530/50. Shorts need stops above 7570. A break higher (& weekly close above for confirmation) is a buy signal into next week. EURJPY holding between first resistance at 135.60/50 & first support at 134.50/30, with a low for the day yesterday as predicted. Maybe we can trade this range before the NFP number today. Longs need stops below 134.10. A break lower targets 133.50/40. Shorts at 135.60/50 stop above 136.80. A break higher targets 136.25/35. Further gains today can allow a retest of this week's high at 137.40/52. A break higher can target 137.90/99.

Despite Russian officials calling for less military operations around Kyiv, fighting has continued widely across Ukraine this week. Ukraine has signalled it would be willing to give up its aspirations to join NATO, and block western states from placing military bases or nuclear weapons on its grounds. Despite this, it has also aimed to gain bilateral security guarantees for example from the US or some of the larger European countries, which we consider unlikely. Another key remaining issue is the eastern Donbass area, where Russia appears to increasingly focus on. Media reports with regards to Ukraine’s willingness to make any territorial concessions have been mixed, but we do not see how Russia could spin the results from its ‘special operation’ as a win domestically without gaining control over at least the regions in Eastern Ukraine. Despite the optimism we have seen in the markets recently, we think the war is still unfortunately far from over. Read our latest take in Research Russia-Ukraine: Talk is cheap - we expect no immediate breakthrough in peace talks but market focus to shift elsewhere, 31 March. As the war drags on, central bankers appear increasingly open for front-loading rate hikes to tame the inflationary pressures. This week, we updated our Fed call, and now look for three consecutive 50bp hikes in May, June and July, and expect Fed Funds Target Range to end the year at 2.50-2.75%. Despite markets pulling back on the rate hike pricing and yields moving lower this week, we think that further tightening in financial conditions will be needed. Read the in-depth update at Fed Update - Quickly back to neutral by front-loading rate hikes, 30 March. Energy price volatility continues, with oil prices moving lower this week on the back of the US announcement of largest Strategic Petroleum Reserve (SPR) release in history. 1 million barrels of reserves will be released per day, over the upcoming six month period, but as this will not be enough to compensate for the expected drop in Russian supply, we maintain our view of elevated crude oil prices going forward. Natural gas prices, in contrast, have moved modestly higher, as Russia has threatened to cut off Europe’s gas supply unless the buyers start settling their payments in rubles. EU members have called this a violation of contract terms, with the likely purpose of supporting RUB and making it increasingly difficult to sanction the remaining Russian banks. The deadline for switching the payment currency is today, but at the time of writing, the situation remains uncertain.  In China, the new lockdowns continue to weigh on activity, with PMIs falling to recession territory in March, signalling further weakness for the global economy and increasing supply chain challenges. Lockdowns will continue in Shanghai next week. Next week will be quiet in terms of economic data or events. From US we will have a range of Fed speakers as well as FOMC minutes from the March meeting, with focus on any hints about the upcoming QT announcement. ECB minutes will also be released alongside a range of European February hard data, which will however be mostly outdated due to the war. The Reserve Bank of Australia (RBA) will meet Tuesday morning, but despite the global inflationary pressures, we do not yet expect to see changes to their monetary policy. Download The Full Weekly Focus

Summary United States: Soaring Price Gauges Turn Up the Pressure on the Fed The Fed's difficult job got harder this week. Its preferred inflation gauge set another fresh 40-year record high, while the ISM prices paid measure shot up 11.5 points to 87.1. Payrolls increased 431K in March with steep upward revisions that lifted the past two months' gains, but personal income is not quite keeping pace with price increases. Small wonder, the yield curve temporarily inverted, a sign the bond market is losing faith in a soft landing. Next week: Trade Balance (Tue.), ISM Services (Tue.), FOMC Meeting Minutes (Wed.) International: Eurozone Inflation Continues to Accelerate Eurozone March CPI inflation quickened more than expected to 7.5% year-over-year, driven by higher energy prices, with other price gains more modest. Still, the overall rate of inflation should see a timely move by the European Central Bank to less accommodative monetary policy despite a mixed growth outlook. Sentiment surveys from China and Japan were soft in tone, suggesting subdued growth from those economies during the first quarter. Next week: Mexico CPI (Thu.), Brazil CPI (Fri.), Canadian Employment (Fri.) Credit Market Insights: Mortgage Rates Accelerate in March as Homebuyers Rush to Lock In Thirty-year mortgage rates reached 4.67% this week, the highest level in over three years. The quarter-of-a-percent increase from last week's 4.42% reading has 30-year mortgage rates on a breakneck pace to reach the 5% mark, a level not seen since February 2011. The white-hot housing market, although resilient, has not been entirely immune to the effects of rising mortgage rates. Topic of the Week: Russia-Europe Gas Standoff Puts the Pressure on American Producers The economic fallout from Russia's invasion of Ukraine continued this week with Putin targeting the EU's heavy dependence on Russian energy sources. President Biden has committed to ramping up U.S. production to cover the gap and released a historic 180 million barrels of oil to help lower domestic prices, but capacity constraints and soaring domestic inflation present headwinds. Download the full report

The minutes of the Federal Reserve’s and European Central Bank’s last policy meetings will likely grab the chunk of investors’ attention next week as the economic agenda quietens down somewhat. The Reserve Bank of Australia is not anticipated to announce any policy shifts at its meeting, but Canadian employment numbers might boost expectations of a 50-basis-points rate hike by the Bank of Canada. However, the evolving geopolitical situation with Ukraine will probably once again be a more important driver for the markets.  

Equity markets remain in recovery mode as gains are held. Meme stocks lose momentum but GME spilt rekindles interest. US employment slowing but revision helps stocks. A slightly calmer week again after some recent volatility, well for equity markets at least. Bond markets remain highly agitated and await a showdown with the Fed. Bond traders seem to be penciling in a recession pretty sharply as they push short-term yields higher. This caused the now well-followed yield curve to invert. And go below zero, ie 2-year rates are higher than 10-year rates. This usually has a pretty decent record of identifying imminent recessions but some analysts are beginning to question the theory. The chart below looks pretty clear-cut to us. US recessions are the shaded areas that follow each move below the black zero line. Back to the week then and the employment report on Friday basically just pushed the decision out for another month. Fed Chair Powell has bet the house on the continued strength of the US economy, backing it to handle multiple rate hikes and 50 bps next month. The bond market is not so sure and neither are we. Friday's jobs report though was a bit underwhelming in this respect. The headline number was a bit lower than expected-indicative of a slow labor market. But the revision was pretty strong and that kept equity investors happy, for now. Chinese stocks were once again in focus on Friday as a Bloomberg report outlined that Chinese authorities may be about to give the US full access to audits of Chinese companies to comply with US listing requirements. This has been a huge weight around the neck of Chinese tech names and Friday saw some massive gains for Didi, Alibaba and others.  Equity positioning data The fund manager community now look to be slightly overweight equities and underweight bonds after correcting the underweight equities position over the past two weeks. This was partly behind the equity rally as were the elevated corporate buyback programs. Both of these bullish effects are now on hold with the upcoming earnings season seeing buybacks entering blackout.  As we can see below the fear factor has dissipated from investors' minds. The markets have now factored in soaring energy prices, the war in Europe, and a stronger rate hike cycle. Markets, as we always say, hate unknowns, now these are known and valuations and expectations can be adjusted accordingly. This does not mean the latest rally from lows means all is rosy, merely that investors have adjusted. Further falls are likely next week but not of the shock and awe variety. We can see just how balanced things are or in other words, no one knows what to do now! Neutral is at one of the highest we've seen from the AAII survey. Source: AAII.com Source: CNN.com   S&P 500 (SPY) stock forecast The recent rally confounded many investors as energy prices soared, war raged in Europe and yields ticked higher. But rally we did as positioning, trend following, and buybacks all helped stabilize losses. Equity positioning quickly moved to underweight equities as the Ukraine conflict raged. Once equities began to show some form of bounce, trend-following CTA’s jumped in squeezing those short and those that needed to buy (mutual/pension funds). Finally, corporate buybacks are at record levels and progressed aggressively over the past two weeks. All of these factors have now abated. Fund managers are now actually slightly overweight equities and underweight bonds. Corporate buybacks are entering the blackout period due to the upcoming earnings season. The technical view on the chart confirms the slowdown in momentum. The SPY rallied impressively back above the double top at $458 and briefly spiked above it to $462. But this was not sustained. Now we're back in neutral. So where does the next momentum come from? We feel the risk-reward is to the downside as momentum has stalled and flows are also stalling. A move back below $448 will confirm this and see some momentum trading shift into trend-based selling programs. Earnings week ahead This lack of momentum is not likely to be changed by earnings next week. Take your pick from a pretty tame week. Source: Benzinga Pro It is a similar story with economic data light on the field after this week's employment report. All eyes will be on the bond market to see where yields take us.     The author is long Alibaba stock  

The Reserve Bank of Australia is likely to keep the key rate on hold at 0.10%. Australia’s wage price growth not enough to endorse a near-term rate hike. RBA’s cautious stance could hit AUD/USD hard but reaction to be limited. An interest rate hike in Australia this year is “plausible,” Reserve Bank of Australia (RBA) Governor Philip Lowe said last month. But not so fast, as the central bank is likely to play the waiting game when it meets to decide on its monetary policy on Tuesday, April 5, at 0430 GMT. Uncertainty around the Ukraine crisis, minor signs of wage inflation and the May Federal election are some of the key factors that could lead the RBA to maintain its cautious stance. Growth in wage inflation not enough The Australian central bank is likely to keep the Official Cash Rate (OCR) on hold at a record low of 0.10% during its April meeting. Having gradually walked back on its pledge of no rate rise before 2024, the RBA still remains in a patient mode after highlighting that the war in Ukraine is a major new source of uncertainty in its March policy announcements. The central bank’s stance is unlikely to change this time around, as it may continue to remain data-dependent, waiting for signs of wage inflation before responding to broad inflationary pressures. Australian wages inflation accelerated to 2.3% YoY in the fourth quarter of 2021 amid a tightening labor market. The annual wage price growth, however, was much below the 3% target that policymakers set before pulling the rate hike plug.  It’s worth noting, the  RBA’s preferred core inflation surged by 1.0% in the last quarter, registering the largest increase since 2008. Meanwhile, Australia’s Unemployment Rate hit the lowest in 13 years in February, arriving at 4.0%. Even though the economy remains on a solid footing, the central bank Chief Lowe was clear enough, during his speech at an event honoring journalists on March 22, that the RBA “will not respond until there is evidence of pervasive price pressures.” Adding to it, Lowe and Co. would want to wait to see the inflationary impact of the latest federal budget announced by Treasurer Josh Frydenberg on March 29. The Australian government pledged billions in fuel tax cuts, cash giveaways and public works spending on Tuesday as it sought voter support ahead of the May election. The RBA would also think it’s appropriate to refrain from pulling the trigger before the polls, which is seen as ‘quite tough’ for the current government.   Money market traders are pricing in a rate rise to 0.25% as early as June, with the rates seen climbing to 1.50% by year-end.  Ahead of the policy meeting, the Australian government appointed Michele Bullock as the new deputy governor of the central bank, replacing Guy Debelle, who resigned from the central bank early in March. The RBA’s policy-setting board is now filled. AUD/USD technical outlook The Australian dollar has stood quite resilient to the central banks’ divergence theme when compared to its G10 peers, in the face of the Russia-Ukraine war-driven surge in commodities prices. With China’s economic slowdown concerns back to the fore, however, aussie bulls are losing the upside conviction. AUD/USD is struggling to resist above the 0.7500 level heading towards the RBA showdown next Tuesday. Only a strong hawkish pivot from the RBA could lead the pair to break through the critical horizontal trendline resistance on the daily chart at 0.7557, which is the level last seen in late October 2021. Dovish forward guidance will knock down AUD/USD towards the bullish 21-Daily Moving Average (DMA) at 0.7395. The reaction in the AUD/USD pair could be also influenced by the risk tone prevalent at the time of the central bank decision.  AUD/USD: Daily chart