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Canada & US Labor Market Data: Forex Market Volatility Expected
Canada and United States labor market data released today (05/06/2026) has increased the possibility of strong volatility in the forex market. Canada’s Employment Change came in at 10.6K, while the market was expecting a decline of -17.7K, showing a much better-than-expected performance in the labor market. At the same time, the Unemployment Rate remained stable at 6.9%. This data is being considered positive for the Canadian Dollar and strength may be seen in CAD.
On the US side, Average Hourly Earnings came in at 0.3%, better than the 0.2% forecast, but the most important NFP report showed only 85K jobs added while the market was expecting 115K. The Unemployment Rate remained unchanged at 4.3%. In my view, strong wage growth will try to support the USD, but weak NFP data may keep pressure on the dollar. If the market gives more importance to the jobs data, USD may appear weak and CAD relatively strong, which could lead to bearish movement in USDCAD.
Major Forex Currency Pair Outlook
EUR/USD is trading around 1.1616 and today’s price action is reflecting dollar weakness. US NFP came in at 85K while the forecast was 115K, which is keeping pressure on the USD. In my opinion, as long as the currency pair holds above 1.1600, buyers may remain in control and the market may try to move toward the 1.1650 – 1.1700 area.
GBP/USD is trading strongly at the 1.3429 level. Weak US labor data has supported the pair and dollar sellers appear active. In my view, if the pair sustains above 1.3400, bullish momentum may continue and buyers may target higher levels. A pause in this rally may only be seen if the dollar recovers.
USD/JPY is trading around 159.93 and selling pressure is being seen in the pair. Along with weak NFP, the market appears to be shifting toward safe-haven currencies, benefiting the JPY. In my opinion, as long as US data sentiment remains weak, a downside correction may be seen in USD/JPY and sellers may remain dominant in the market.
US Dollar Index (DXY):
The biggest factor for the dollar today has been the NFP report, which came in at 85K while the market was expecting 115K. Although Average Hourly Earnings remained at 0.3%, better than the 0.2% forecast, traders currently appear to be focusing more on weak job growth. In my opinion, short-term pressure may remain on the DXY and until a strong bullish catalyst emerges, recovery in the dollar may appear limited.
Federal Reserve (Fed) Testimony & USD Impact
The latest testimony from the Federal Reserve described the banking system as sound and resilient, with strong bank capital strength and liquidity buffers. The Fed also highlighted that lending growth and profitability in the banking sector remain stable, but the share of non-bank financial institutions (NBFIs) is increasing rapidly, affecting competition with traditional banks. At the same time, the Fed’s focus on AI and cybersecurity risks is clear, as it aims to modernize the financial system while maintaining stability. Overall, the tone provides medium-term support to the USD, as financial system stability and regulatory clarity send a positive signal.
Bank of Japan (BOJ) Consumption Focus & JPY Outlook
On the other hand, the Bank of Japan (BOJ) has focused on private consumption, which is approximately 50% of Japan’s GDP. The BOJ’s Consumption Activity Index (CAI) measures short-term consumption activity of goods and services, which provides an idea of the economy’s business cycle. The BOJ’s data approach shows that the main driver of growth in the Japanese economy is domestic demand, therefore consumption data will be an important signal for the future direction of the yen. If consumption remains strong, the JPY may get support, whereas weak consumption will keep the BOJ on an accommodative stance, due to which the yen may remain under pressure.
Most Recent News
EUR/USD met some selling stress after rising to the mid-1.1700s during the Asian session closing much of the bullish gap seen at the start of the week. Despite this the pair is still holding above the key 1.1700 level so traders should be careful before expecting a continuity of Friday’s pullback from the recent high.
From a technical view the pair maintains a just bullish outlook as it remains above the 200-period Simple Moving Average (SMA) on the 4-hour chart display that dips are still being bought. The Relative Strength Index (RSI) is around 53 indicating mild positive impetus without being overbought while the MACD stays slightly above zero. This suggests buying pressure exists but it is not very strong yet.
However after Friday drop it is safer to wait for a clear move above 1.1750 which also aligns with the 23.6% Fibonacci level before gone further upside. The next resistance is near the recent high around 1.1847.
On the downside support is seen near 1.1692 (38.2% Fibonacci level). Below that a strong support zone lies around 1.1648–1.1644 where the 200-period SMA and 50% retracement meet. If the pair falls further the next levels to watch are 1.1596, followed by 1.1528 and 1.1441.
EUR/CAD continues to move lower for the third direct session trading near 1.5920 during Friday Asian session. The pair is under stress as the Euro weakens mostly due to rising risk aversion linked to ongoing tensions in the Middle East.
On Thursday US President Donald Trump said the naval siege of Iranian ports would remain in place. This comes among growing concerns that the critical Strait of Hormuz may stay closed for a long period. He also blamed attempts by Congress to limit his war powers including a Senate proposal that was rejected earlier according to Bloomberg.
Meanwhile Iran Supreme Leader Mojtaba Khamenei motioned a tough stance stating that Iran would not give up its nuclear or missile programs. He also indicated that the country aims to maintain control over the Strait.
In Europe the European Central Bank kept interest rates unchanged at its April meeting holding the deposit rate at 2%. The bank recognized that while the overall outlook remains stable risks to inflation have high and growth risks are leaning to the downside due to geopolitical tensions.
At the same time the Canadian Dollar is finding support from stronger oil prices which is adding then pressure on EUR/CAD. Although West Texas Intermediate opened lower it managed to recover just and trading around $102.40 per barrel though still in negative territory. Oil prices are on track for a second weekly gain as aims for a US-Iran deal continue to fade and concerns grow that the Strait of Hormuz may not reopen anytime soon.
Gold (XAU/USD) is trading just higher in early Thursday European session, holding on to little gains after impressive a fresh monthly low in the early session. However the overall outlook remains careful. The US Dollar continues to adjust for the fourth direct day following a quite hawkish stance from the Federal Reserve. Ongoing tensions between the US and Iran have also pushed the Dollar to its highest level since 13 April which is keeping pressure on gold prices.
As scheduled the US central bank kept interest rates unchanged at 3.50%–3.75%. Still decision saw notable dispute, with three policymakers opposite the tone of the statement the highest level of dissent since 1992. During the press conference Fed Chair Jerome Powell explained the talk focused on the tone of policy rather than any instant need for rate hikes. Even so traders have scaly back expectations of rate cuts in 2026 and are now pricing in more than a 10% chance of a rate boost by the end of the year.
At the same time rise energy prices driven by geopolitical tensions are attaching to inflation concerns. The status in the Middle East remains upset with US President Donald Trump refusing Iran’s latest proposal to end the war. He also repeated that no agreement will be reached unless Iran gives up its nuclear program. In extension the naval blockade of Iranian ports continues to break energy supply routes through the Strait of Hormuz.
These factors are supporting the US Dollar power and limiting any strong upside move in gold. Still gold has handled to break a three-day losing streak and is currently trading near $4,565, up around 0.50% on same day. Market participators are now delaying for key US data including the advance Q1 GDP report and the PCE Price Index. Policy updates from the Bank of England and the European Central Bank may also drive market volatility.
Technical outlook
Gold technical setup rest weak. The price just failed to stay above the 200-period Simple Moving Average on the 4 hour chart and under below the 38.2% Fibonacci retracement level of the March and April rally which favors sellers.
Impetus indicators also point to nonstop pressure. The Relative Strength Index (RSI) is near 38 showing weak buying power while the MACD remains in negative territory. This suggests that any recovery could be limited unless gold moves above key resistance levels.
On the downside instant support is at $4,494. A break under this level could push prices toward $4,401 and then $4,268, where powerful support may come into play if selling pressure increases further.
Asian markets traded unevenly on Friday, with most indices slipping as rising oil prices weighed on sentiment. The surge in energy costs comes amid stalled US–Iran negotiations and continued disruptions in the Strait of Hormuz, keeping investors cautious across the region.
Japanese equities showed a mixed performance. The Nikkei 225 managed to edge higher as investors reacted to fresh inflation data. Japan’s annual inflation rose to 1.5% in March, up from 1.3% in February, while core inflation increased to 1.8% year-on-year. Despite the uptick, both figures remain below the Bank of Japan’s 2% target, reinforcing expectations that the central bank may hold interest rates steady in its upcoming policy meeting.
Across the region, concerns about energy supply continue to dominate market sentiment. Many Asian economies rely heavily on Middle Eastern oil, making them sensitive to geopolitical developments involving Iran. Ongoing tensions and supply disruptions have kept oil prices elevated, raising fears about inflation and slowing global growth.
Elsewhere, markets struggled to gain momentum. Hong Kong’s Hang Seng Index slipped slightly, while South Korea’s KOSPI declined more sharply, pressured by weakness in technology stocks and profit-taking after recent gains. China’s SSE Composite Index also moved lower, reflecting cautious investor sentiment.
Geopolitical tensions added further pressure. Reports of US forces intercepting Iranian oil tankers and ongoing threats to shipping routes in the Strait of Hormuz have kept markets on edge. In South Korea, however, gains in defense-related stocks such as Hanwha Aerospace and Doosan Enerbility helped limit broader losses as investors rotated into sectors likely to benefit from rising geopolitical risks.
Gold is holding steady just below the $4,700 level during the early European session, showing some strength despite ongoing pressure. The main reason behind this weakness is a stronger US Dollar, which has been gaining for three consecutive days and continues to weigh on the metal. Ongoing tensions between the United States and Iran—particularly around the Strait of Hormuz and the US naval blockade—are also supporting the dollar. At the same time, reduced expectations of further interest rate cuts from the Federal Reserve are adding to the USD’s strength, putting additional pressure on gold prices.
Although US President Donald Trump recently extended a temporary ceasefire with Iran, markets remain cautious. Investors are not fully convinced that tensions will ease, especially with no real progress in negotiations. Iran has made it clear that the removal of the US naval blockade is a key condition for talks to resume, while recent actions by the Islamic Revolutionary Guard Corps, including the seizure of two container ships, have increased concerns about further escalation. These developments are keeping geopolitical risks elevated and continue to support the US Dollar’s safe-haven appeal.
At the same time, disruptions in energy supply through the Strait of Hormuz are keeping crude oil prices high, which is pushing global inflation higher. This situation is leading to expectations that central banks, including the Federal Reserve, may maintain a more cautious or even hawkish approach. Even though the Fed has hinted at one rate cut this year, strong economic data and persistent inflation are making policymakers more hesitant. This reduces the appeal of gold, which does not offer interest, and encourages investors to move toward the dollar instead.
From a technical perspective, gold is trading near the lower end of an upward trend channel, suggesting a neutral short-term outlook. The Relative Strength Index (RSI) is around 39, indicating weakening momentum but not yet oversold conditions. The MACD indicator also remains negative, showing that bullish momentum is still limited.
If gold falls below the $4,700 level and breaks the key support near $4,691, it could lead to further downside toward the $4,568 area. On the other hand, if buyers manage to push prices above the resistance around $4,926, it could signal a return of bullish momentum and open the door for further gains.
The US Dollar Index (DXY), which tracks the strength of the US Dollar against six major currencies, is showing slight recovery after minor losses in the previous session. It is currently trading near 98.10 during early European trading hours on Tuesday.
Looking at the daily chart, the index is still moving within a descending channel, which generally signals a downward trend. This keeps the overall outlook slightly negative for now.
In the short term, the bias remains bearish as the index is trading below both the 9-day and 50-day Exponential Moving Averages (EMAs). The 14-day RSI is also hovering around 40, indicating weak momentum and suggesting that sellers are still in control after the recent decline.
If the downside continues, the index could move toward the lower boundary of the channel near 97.20. A clear break below this level may increase selling pressure and push the index toward 95.56 — its lowest level since February 2022, last seen on January 27.
On the upside, immediate resistance is seen around the 9-day EMA near 98.40. Beyond that, the upper channel boundary near 98.70 and the 50-day EMA at 98.83 could act as strong resistance levels. If the index manages to break above this zone, it may shift the sentiment to bullish and open the door toward 100.64, which is close to a 10-month high recorded on March 31.